Risk tolerance

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Risk management.


Strictly, an absolute maximum acceptable level of risk.

In this strict sense, risk tolerance is the amount of risk that the firm can actually bear.

This amount of risk could be represented by the firm's capital, or by an amount of capital above a base amount of capital that cannot be put at risk.


The term 'risk tolerance' is also sometimes used in a looser sense, to mean the same as 'risk appetite'.

See also