CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What is distortion risk measure?

Distortion risk measure

This is a term used in financial mathematics. It's one of a number of types of measures, which are designed to predict investment risk.

Where have you heard about distortion risk measure?

There are several examples of distortion risk measures that you may have come across. These include value at risk and conditional value at risk.

What you need to know about distortion risk measure.

It's related to the cumulative distribution function of the return of a financial portfolio. Distortion risk measures work in a similar way to general risk measures, having similar properties, but they also allow an asset manager to reflect a client’s attitude to risk by choosing the distortion function. The concept was first applied to insurance issues, such as the determination of premiums and capital allocation. Investment managers then began applying distortion risk measures in the context of asset allocation.

Find out more about distortion risk measure.

To learn more about this type of theory, check out our guide to spectral risk measure.

Related Terms

Latest video

Latest Articles

View all articles

Still looking for a broker you can trust?

Join the 580.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading