In
economics and
finance,
risk aversion is the behavior of
humans (especially
consumers and
investors), when exposed to
uncertainty, to attempt to reduce that uncertainty. It is the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower,
expected payoff. For example, a risk-averse investor might choose to put his or her money into a
bank account with a low but guaranteed interest rate, rather than into a
stock that may have high expected returns, but also involves a chance of losing value.