Valuation risk refers to the uncertainty associated with determining the true worth of an investment, particularly in private equity and venture capital contexts. This type of risk emerges from factors like fluctuating market conditions, subjective valuations, and the potential for over- or underestimating an asset's value. Understanding valuation risk is crucial as it can significantly impact investment decisions, exit strategies, and overall financial performance.
congrats on reading the definition of Valuation Risk. now let's actually learn it.