What are the three types of project risk?

Standalone risk is the risk associated with a single operating unit of a company, a company
division, or asset, as opposed to a larger, well-diversified portfolio. In which the person invest all
of their capital in one company and take the higher risk and in which the company is offering
more return to the investor that’s why they attracted towards it.

Corporate Risk. A category of risk management that looks at ensuring an organization

meets its corporate governance responsibilities takes appropriate actions and identifies
and manages emerging risks

Market risk is the risk that arises from movements in stock prices, interest rates, exchange rates,
and commodity prices.

Portfolio risk is a chance that the combination of assets or units, within the investments that you
own, fail to meet financial objectives. Each investment within a portfolio carries its own risk,
with higher potential return typically meaning higher risk.

Probability distribution, where the set of outcomes are discrete in nature. For example, if a dice
is rolled, then all the possible outcomes are discrete and give a mass of outcomes. It is also
known as the probability mass function.

A rate of return (RoR) is the net gain or loss of an investment over a specified time period,
expressed as a percentage of the investment's initial..

The expected return is the profit or loss that an investor anticipates on an investment that has
known historical rates of return (RoR). It is calculated by multiplying potential outcomes by the
chances of them occurring and then totaling these results.

Standard deviation is a basic mathematical concept that measures volatility in the market or the
average amount by which individual data points differ from the mean. Simply put, standard
deviation helps determine the spread of asset prices from their average price.

The coefficient of variation (CV) is the ratio of the standard deviation to the mean. The higher
the coefficient of variation, the greater the level of dispersion around the mean. It is generally
expressed as a percentage.

Weighted average is a calculation that takes into account the varying degrees of importance of
the numbers in a data set. In calculating a weighted average, each number in the data set is
multiplied by a predetermined weight before the final calculation is made.

Portfolio risk is a chance that the combination of assets or units, within the investments that you
own, fail to meet financial objectives. Each investment within a portfolio carries its own risk,
with higher potential return typically meaning higher risk.
Portfolio return refers to the gain or loss realized by an investment portfolio containing several
types of investments. Portfolios aim to deliver returns based on the stated objectives of the
investment strategy, as well as the risk tolerance of the type of investors targeted by the portfolio.

A risk premium is the higher rate of return you can expect to earn from riskier assets like
stocks, instead of investing in a risk-free assets like government bonds. E.g.:The difference
between the risk-free rate of 5% and the expected return of the stock of 7%. So the risk premium
is 2%.

The market risk premium“is the difference between the expected return on the risky market
portfolio and the risk-free interest rate. It is an essential part of the CAPM where it characterizes
the relationship between the beta factor of a risky assets and ist expected return.

A firm-specific risk is the unsystematic risk associated with a specific investment in a firm that
is completely diversifiable as per the theory of finance. Under this risk, the investor can lower
their risk by increasing the number of investments they have in their portfolio.

Beta is a concept that measures the expected move in a stock relative to movements in the
overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader
market, and a beta less than 1.0 indicates a stock with lower volatility.

The security market line (SML) is a line drawn on a chart that serves as a graphical
representation of the capital asset pricing model (CAPM). The SML can help to determine
whether an investment product would offer a favorable expected return compared to its level of
risk.

The capital asset pricing model (CAPM) is an idealized portrayal of how financial markets
price securities and thereby determine expected returns on capital investments. The model
provides a methodology for quantifying risk and translating that risk into estimates of expected
return on equity.

Diversification: It is one way to balance risk and reward in your investment portfolio by
diversifying your assets. Diversification is the practice of spreading your investments
around so that your exposure to any one type of asset is limited. This practice is
designed to help reduce the volatility of your portfolio over time.