Asymmetric Risk Management

Asymmetric is not symmetry. Asymmetric is imbalanced: more of one, less of the other.

What is Risk Management? Risk Management, as I define it, uses tactics and systems to make decisions actively to decrease or increase exposure to the potential for loss.

Asymmetric Risk Management means to manage risk with the objective of a positive asymmetrical risk/reward.

Asymmetric Risk Management intends to cut losses short and let profits run.

A positive asymmetrical risk/reward occurs when the potential or realized reward is greater than the potential or realized loss.

When we speak of asymmetrical risk/reward, we typically mean it is a positive one. But, an asymmetric risk/reward can also be negative.

Asymmetric risk is the risk an investor faces when the gain realized from the move of an underlying asset in one direction is significantly different from the loss incurred from its move in the opposite direction.

Asymmetric reward is the reward an investor may achieve when the gain realized from the move of an underlying asset in one direction is significantly different from the loss incurred from its move in the opposite direction.

See also:

Asymmetric Return Distribution

Asymmetric Risk

Asymmetric Return Distribution

 

For more information, see:

Asymmetric Payoff

Asymmetric Investing

Asymmetric Risk

Asymmetric Trading System

Asymmetric Return Distribution

Asymmetry Ratio

Absolute Return

Positive Asymmetry