Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference.[1][2]
Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk can be measured either with downside beta or by measuring lower semi-deviation.[3]: 3 The statistic below-target semi-deviation or simply target semi-deviation (TSV) has become the industry standard.[4]
- ^ McNeil, Alexander J.; Frey, Rüdiger; Embrechts, Paul (2005). Quantitative risk management: concepts, techniques and tools. Princeton University Press. pp. 2–3. ISBN 978-0-691-12255-7.
- ^ Horcher, Karen A. (2005). Essentials of financial risk management. John Wiley and Sons. pp. 1–3. ISBN 978-0-471-70616-8.
- ^ James Chong; Yanbo Jin; Michael Phillips (April 29, 2013). "The Entrepreneur's Cost of Capital: Incorporating Downside Risk in the Buildup Method" (PDF). Retrieved 25 June 2013.
- ^ Nawrocki, David (Fall 1999). "A Brief History of Downside Risk Measures" (PDF). The Journal of Investing. 8 (3): 9–25. CiteSeerX 10.1.1.22.262. doi:10.3905/joi.1999.319365. S2CID 155082662. Retrieved 27 February 2015.
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