Risk aversion is a concept in psychology

Psychology

Psychology is the study of the mind and behavior. Its immediate goal is to understand individuals and groups by both establishing general principles and researching specific cases. For many, the ultimate goal of psychology is to benefit society...

, economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, and finance

Finance

"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

, based on the behavior of human

Human

Humans are the only living species in the Homo genus...

s (especially consumer

Consumer

Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

s and investor

Investor

An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...

s) while exposed to uncertainty

Uncertainty

Uncertainty is a term used in subtly different ways in a number of fields, including physics, philosophy, statistics, economics, finance, insurance, psychology, sociology, engineering, and information science...

.

Risk aversion 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

Expected value

In probability theory, the expected value of a random variable is the weighted average of all possible values that this random variable can take on...

. For example, a risk-averse investor might choose to put his or her money into a bank

Bank

A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

 account with a low but guaranteed interest rate, rather than into a stock

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 that may have high expected returns, but also involves a chance of losing value.

Outside the rather mathematical fields of economics and finance, people have to make choices about how they face risks every day.