A description that an investor or broadly a market player is not willing to take risk, preferring outcomes with low exposure to those with high exposure and uncertainty. Risk aversion is the tendency of market participants to avoid risk and the impact of risk on their investments or positions. Typically, risk implies volatility of outcomes (uncertainty). Risk-averse investors prefer outcomes with low uncertainty (certain outcomes) to outcomes with high uncertainty (uncertain outcomes), even if the average outcome of the low uncertainty, in general, is equal to or higher than the more certain outcome (calculated in monetary terms).

In other words, risk-averse investors prefers lower returns with familiar types of risks rather than higher returns with unfamiliar risks.