as: a) the chance or hazard of commercial loss; also . . . bj. . . the chance that is accepted in economic enterprise and considered the source of (an entrepreneur's) profit. This definition asserts that risk reveals itself in the form of uncertainty. This uncertainty of loss, which risk professionals quantify using the laws of probability, represents the cost that businesses accept to produce profit. Loss potential (i.e., "risk") represents the "shadow price" behind profit expectations. A willingness to accept loss in order to generate profit suggests that a cost benefit process is present. For a return to be deemed desirable, it should attain levels that compensate for the risks incurred. There are typically policy limits that constrain an organization's willingness to assume risk in order to generate profit. To manage this constraint, many organizations formally budget risk usage through asset allocation policies and methods (e.g., mean-variance optimization techniques). The result yields a blend of assets that will produce a level of expected returns and risk consistent with policy guidelines. Risk, in financial institutions, is frequently defined as Value at Risk (VaR). VaR refers to the maximum dollar earnings/loss potential associated with a given level of statistical confidence over a given period of time. VaR is alternatively expressed as the number of standard deviations associated with a particular dollar earnings/loss potential over a given period of time. If an asset's returns (or those of an asset class) are normally distributed, 67 percent of all outcomes lie within the asset's average returns plus or minus one standard deviation. Asset managers use a concept analogous to VaR-called tracking error-to gauge their risk profile relative to a benchmark. In the case of asset managers, clients typically assign a benchmark and a projected risk and return target vis a vis that benchmark for all monies assigned to the asset manager's stewardship. The risk budget is often referred to as tracking error, which is defined as the