Relationship Between Risk And Reward
From Open Risk Manual
Definition
Relationship Between Risk And Reward. In the context of the Financial Competence Framework, Relationship Between Risk And Reward is a topic in the Risk And Reward subject matter domain.[1]
Competences
Mastering the role of Relationship Between Risk And Reward in financial literacy context requires the following competences:
| Code | Competency Description | Competency Type |
|---|---|---|
| 395 | Understands the relationship between risk and potential reward which means that if there is a high chance of making money on an investment there is also likely to be a high chance of losing money | Knowledge |
| 396 | Understands the purpose of investment diversification as a strategy to reduce the risk | Knowledge |
| 397 | Identifies the potential financial risks and rewards related to a decision that needs to be made | Skill |
| 398 | Compares the risk and reward of different financial investments | Skill |
| 399 | Takes into account the need for asset growth, financial security, and one’s own sustainability preferences when considering investment risk | Skill |
| 400 | Considers the risk of using credit for discretionary spending | Skill |
References
- ↑ European Union/OECD (2022), Financial competence framework for adults in the European Union
