Risk and volatility are related but distinct concepts in finance. While volatility measures the variation in an asset s prices over time, risk encompasses the possibility of unexpected outcomes or losses that are not solely captured by volatility. The use of some methodologies, such as the CAPM (Capital Asset Pricing Model), assumes that volatility, represented by beta, is synonymous with risk, which can be limiting. Furthermore, the CAPM is based on simplifying assumptions, such as efficient markets, which may not reflect reality and can lead to inaccurate estimates of the cost of equity. There are, however, other more accurate methodologies for calculating the cost of equity, including the Bond Yield Plus Risk Premium approach.