Financial risk refers to the potential for volatility in investment performance due to the use of borrowed money. It indicates the possibility of losing money when investing in financial instruments.
Highly leveraged situations in business or investments involve financing to a large degree using borrowed money, which raises the stakes in terms of financial risk and the potential for both gains and losses.
Reverse leverage, also known as negative leverage, occurs when the financial benefits from ownership accrue at a lower rate than the interest rate paid for borrowed money.
