What is the difference between Risk and Uncertainty?

Risk is a concept which relates to human expectations. It denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or from some future event. In everyday usage, "risk" is often used synonymously with "probability" of a loss or threat. In professional risk assessments, risk combines the probability of an event occurring with the impact that event would have and with its different circumstances. However, where assets are priced by markets, all probabilities and impacts are reflected in the market price, and risk therefore comes only from the variance of the outcomes; this startling fact is one of the conclusions of Black-Scholes pricing theory. Uncertainty is a term used in subtly different ways in a number of fields, including philosophy, statistics, economics, finance, insurance, psychology, engineering and science. It applies to predictions of future events, to physical measurements already made, or to the unknown. Relation between uncertainty, probability and risk In his seminal work Risk, Uncertainty, and Profit, University of Chicago economist Frank Knight (1921) established the important distinction between risk and uncertainty: "Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all." Risk is defined as uncertainty based on a well grounded (quantitative) probability. Formally, Risk = (the probability that some event will occur) X (the consequences if it does occur). Genuine uncertainty, on the other hand, cannot be assigned such a (well grounded) probability. Furthermore, genuine uncertainty can often not be reduced significantly by attempting to gain more information about the phenomena in question and their causes. (Andersen et. al.: Modelling Society’s Capacity to Manage Extraordinary Events, 2004.) There are other measures of uncertainty: In stochastics, risk is an uncertainty for which probability can be calculated (with past statistics for example) or at least estimated (doing projection scenarios) mathematically. In insurance, risk deals only with negative uncertainty (those bringing loss or harm) In cognitive psychology, uncertainty can be real, or just a matter of perception, such as expectations, threats, etc. Mathematicians handle uncertainty using probability theory, Dempster-Shafer theory, and fuzzy logic. See also probability. Surprisal is a measure of uncertainty in information theory.

Risk is calculated and expected you are aware of risk, uncertainty is more of a gut feeling.

Uncertainty is something YOU are untstable about. you're not sure about something. Risk is something completely different it means that you're on the edge and you can either go back the safe way or carry on when there's a 50/50 chance you'll fall.

Risk is a position that has known outcome variables, uncertainty is just that !