Kai W. Hong, CFA
Managing Director & Chief Investment Strategist, Bivium Capital

Fundamentally, risk can be seen as the probability of not meeting one’s expectations. In this context, risk may lead to positive or negative outcomes, but most focus is given to downside risks (a negative result on both an absolute and relative basis) and opportunity costs (a positive result on an absolute basis, but a negative result on a relative basis). The challenge is in defining what those expectations should be and determining how to react when outcomes diverge meaningfully from those expectations.