The first example is when one knows that it can take a long time before one can get one's money back, but one decides to take a calculated risk.
I know that there is a higher chance that I will get my money back or make some profit but I also understand that it may take more than ten years before that happens. That is a calculated risk investing with a risky time factor.
Note that the longer one is holding a position the higher is the risk because the financial markets can swing up or down anything due to external and internal factors.
The second example relates to the risk-reward ratio.
Suppose one buys a stock for $10, but the average debt per share is $20. Really one is buying at $10 loss per share as soon one hits that buy button. As you can see, at face value, it is crazy to consider that investment proposition. Right?
Now imagine, one is an expert in picking risky assets that quickly become valuable over few years. One notices that an ongoing restructuring is maturing for sometimes. The management is now willing to repurchase their own shares at the right price and pay dividends. The balance sheet is being actively pruned and the insiders are buying.
After all those considerations, one decides to buy the stock at $10 though the debt per share is $20. In that instance, one has taken a calculated risk with a financials risk factor.The Third Example of a calculated risky investment strategy is to buy an asset that has failed the Google finance acid test.
Yes, one has tested it and it badly fails the Google finance acid test. Right? One also understands that it means the company in the short term is financially under pressure to satisfy its short term creditors if it is put under pressure.
However, the management is not giving up, but putting in place measures that creditors really like. One of those measures may be complying to creditors demand of keeping both dividends and shares buybacks on hold.
After taking time to weight the risk-reward factor, one sees that there is a high chance that the company will survive the short term crunch, and remain in business in a foreseeable future. After all, one decides to take a calculated risk to buy it.