What Is Unrealised risk?
Unrealized risk refers to the potential for loss or underperformance in a financial investment or trading position that has not yet been closed or settled. Unlike realized risk, which captures actual losses or gains, unrealized risk represents the possibility of future losses or gains as long as the position remains open. It quantifies the extent to which an asset or portfolio could be impacted by future market fluctuations.
Example: If an investor owns shares of a company that have declined in value but has not yet sold those shares, the decline represents an unrealized risk. Until the investor sells the shares, the potential for loss or gain remains.
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