Operating risk is the risk associated with the mix of fixed vs. variable operating costs. The DOL is determined largely by the line of business. Interest rate risk is the sensitivity of a security's price to the change in market yields. When in doubt, try a numerical example. Also referred to as inflation risk .
Currency risk is the uncertainty associated with changes in the relative value of currencies.
Measurement of risk We can use uncertainty statistics to give us a description of the expected value and the dispersion of possible values about the expected values. The standard deviation is a measure of the risk associated with a particular probability distribution of possible future outcomes. The statistics involve weighted averages, where the probabilities are the weights. Therefore, investors demand more expected return if they take on more risk. A portfolio is a collection of investments.