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  1. Risk IT

    Cleanup date January 2011 notability date November 2011 Risk IT provides an end to end, comprehensive view of all risk s related to the use of Information technology IT and a similarly thorough treatment of risk management, from the tone and culture at the top, to operational issues. Risk IT was published ... FW 18Nov09 Research.pdf ISACA THE RISK IT FRAMEWORK registration required ref It is the result of a work ... such as IBM , PricewaterhouseCoopers , Risk Management Insight , Swiss Life , and KPMG . Definition IT risk is a part of business risk specifically, the business risk associated with the use, ownership ... Management of business risk is an essential component of the responsible administration of any organization. Due to IT s importance to the overall business, IT risk should be treated like other key business risks. The Risk IT framework ref name RITF explains IT risk and enables users to Integrate the management of IT risk with the overall Enterprise risk management ERM Compare assessed IT risk with risk appetite and risk tolerance of the organization Understand how to manage the risk IT risk ... issue of IT department. IT risk can be categorised in different ways IT Benefit Value enabler risks ... business i.e. the risk of over budget or late delivery or not delivery at all of these projects ... of IT that can bring issues, inefficiency to the business operations of an organization The Risk IT framework is based on the principles of enterprise risk management standards frameworks such as COSO ERM and ISO 31000 . In this way IT risk could be understood by upper management. Risk IT principles Risk IT is built around the following principles ref name RITF always align with business objectives align the IT risk management with ERM balance the costs and benefits of IT risk management promote ... accountability are a continuous process and part of daily activities IT risk communication components Major IT risk communication flows are Expectation what the organization expects as final ...   more details



  1. Risk

    Other uses Expert subject multiple Philosophy Economics Sociology type article date December 2011 Risk ... some risk, but some are much more risky than others. File 3 Alarm Building Fire.jpg thumb Firefighters ... in English in the spelling of risque as from 1621, and the spelling as risk from 1655. It defines risk as blockquote Exposure to the possibility of loss, injury, or other adverse or unwelcome circumstance ... For the sociologist Niklas Luhmann the term risk is a neologism that appeared with the transition ... and North African Arab traders. In the English language the term risk appeared only in the 17th century, and seems to be imported from continental Europe. ref name Luhm96 3 When the terminology of risk ... The scientific approach to risk entered finance in the 1960s with the advent of the capital asset ... States Environmental Protection Agency . Definitions of risk ISO31000 2009 Risk Management Standard The ISO 31000 2009 ISO Guide 73 2002 definition of risk is the effect of uncertainty on objectives .... Many definitions of risk exist in common usage, however this definition was developed by an international ... subject matter experts. Other definitions of risk The many inconsistent and ambiguous meanings attached to risk lead to widespread confusion and also mean that very different approaches to risk management are taken in different fields. ref Douglas Hubbard The Failure of Risk Management Why It s Broken and How to Fix It , John Wiley & Sons, 2009. ref For example ref E.g. Risk is the unwanted subset of a set of uncertain outcomes. Cornelius Keating . ref Risk can be seen as relating to the Probability ... Risk , risk is ref name FAIRW http www.riskmanagementinsight.com media docs FAIR introduction.pdf An Introduction to Factor Analysis of Information Risk FAIR , Risk Management Insight LLC, November ... is used by The Open Group . ref name OGC081 Technical Standard Risk Taxonomy ISBN 1 931624 ... & Safety Advisory Services defines risk as the product of the probability of a hazard resulting in an adverse ...   more details



  1. At Risk

    Infobox Film name At Risk image caption director Elana K. Pyle writer Elana K. Pyle br David E. Pyle starring Elana K Plye br Kim Myers Kim Meyers br Daniel McDonald actor Daniel McDonald br Vince Vaughn producer Kari Nevil br David E. Pyle music Kevin Hedges cinematography David Scardina editing James Philip Curtis br Robert Grahamjones distributor released 1994 runtime 95 min country Film US language English budget At Risk is a 1994 film about a woman name Lara, after spending a year in Mexico unsuccessfully trying to save her marriage to Steven, returns to the U.S. to find Max, her lover in this AIDS cautionary tale. Starring Elana K. Pyle as Lara Wade Daniel McDonald actor Daniel McDonald as Steven Wade Kim Myers Kim Meyers as Jennifer Rich Vince Vaughn as Max Nolan Shirley Anne Field as Mrs. Nolan Randy Travis as Ellison Matthew Flint as Mark References reflist External links IMDb title 0109165 Amg movie 133955 http movies.yahoo.com movie 1809402653 info At Risk 1994 at Yahoo Movies Category 1994 films Category American films Category Romantic drama films Category English language films Category Independent films indie film stub ...   more details



  1. IT risk

    Information technology risk , or IT risk , IT related risk , is any risk related to information technology ... speaking, risk is the product of the likelihood of event occurring and the impact that event would have on an information technology asset, i.e. Risk Likelihood Impact. ref Risk is a combination ... and the asset s value to its stakeholders. Thus, IT risk can be expanded to Risk Threat Vulnerability ... 2009 publisher Elsevier Inc isbn 978 0 12 374354 1 page 232 chapter Chapter 14 ref Because Risk Risk as a vector quantity risk is strictly tied to uncertainty, Decision theory should be applied to manage risk as a science, i.e. rationally making choices under uncertainty. Definitions Definitions of IT risk come from different but authoritative sources. ISO IT risk the potential that a given threat ... Security techniques Information security risk management ISO IEC FIDIS 27005 2008 ref Committee ... States of America defined risk in different documents From CNSS Instruction No. 4009 dated 26 April ... 26 April 2010 ref the basic and more technical focused definition Risk Possibility that a particular ... aspect, quite similar to NIST SP 800 30 one Risk A combination of the likelihood that a threat ... risk in the IT field as ref http niatec.info Glossary.aspx?term 4253&alpha R NIATEC Glossary of terms ... or the vulnerability reduces the risk. The uncertainty of loss expressed in terms of probability ... define risk in IT context in different publications FISMApedia ref http fismapedia.org index.php a wiki project devoted to FISMA ref term ref http fismapedia.org index.php?title Term Risk FISMApedia Risk term ref provide a list. Between them According to NIST SP 800 30 ref name SP80030 http csrc.nist.gov publications nistpubs 800 30 sp800 30.pdf NIST SP 800 30 Risk Management Guide for Information Technology Systems ref Risk is a function of the likelihood of a given threat source s exercising ... ref Risk The level of impact on organizational operations including mission, functions, image ...   more details



  1. Risk analysis

    Risk Analysis may refer to Quantitative risk analysis Risk analysis engineering Probabilistic risk assessment , an engineering safety analysis Risk analysis business Risk Management Risk management tools Certified Risk Analyst Food safety risk analysis disambig de Risikoanalyse no Risikoanalyse lt Rizikos analiz ...   more details



  1. Risk and compliance

    Risk and compliance may refer to Legal governance, risk management, and compliance Governance, risk management, and compliance Internal audit dab ...   more details



  1. High Risk

    High Risk may refer to High Risk TV series High Risk TV series , 1988 American television series High Risk 1995 film High Risk 1995 film , an action film starring Jet Li High Risk 1981 film High Risk 1981 film , a film written and directed by Stewart Raffill High Risk novel , written under the pseudonym, Carolyn Keene High Risk Books , a defunct publisher in New York City disambig ...   more details



  1. Government risk

    unreferenced date November 2010 dicdef Government risk is an investment term used to collectively describe the impact of prospective changes in legislation, policies of the executive branch within existing legislation, and corruption. It is typically referenced as distinct from other forms of risk, such as market risk , credit risk , price risk, and natural risk when assessing the viability of an investment project. Distinction from Country Risk It is often confused with the term country risk when assessing investments in foreign countries, but government risk is in fact a subset of country risk. Specifically, government risk refers only to interactions with government, but not the following elements of country risk crime and property security currency risk different cultural norms around business ethics monopolies or business conglomerate power within in country markets Category Financial risk ...   more details



  1. Risk (disambiguation)

    wiktionary risk Risk or risks may refer to Risk , the variability in possible outcomes, usually in reference to the possibility of negative results Risk assessment , the measurement or modeling of risk. Risk management , mitigation of risk using managerial resources Risk game Risk game , a strategy board game of world conquest Risk Megadeth album Risk Megadeth album , a 1999 album by the metal band Megadeth Risk Terminaator album Risk Terminaator album , a 2001 album by rock band Terminaator Risk Paul Brandt album Risk Paul Brandt album , a 2007 album by country music singer Paul Brandt Risk Ten Shekel Shirt album Risk Ten Shekel Shirt album , 2003 Risk film Risk film , a 2007 Bollywood film directed by Vishram Sawant Risk magazine Risk magazine , a financial magazine covering risk management Risk short story Risk short story , a 1955 science fiction short story by Isaac Asimov Risk comics , a DC comics character and member of the Teen Titans RISKS Digest , an online computer security periodical published by the ACM Risk statistics Risk , book by John Adams geographer RISK , a storytelling podcast created and hosted by Kevin Allison Risky may refer to Risky album Risky album , a studio album by Japanese band B z See also RISC disambiguation Disambig de Risiko Begriffskl rung de Risk es Risk desambiguaci n fr Risk homonymie he hr Rizik razdvojba ru sh Rizik razvrstavanje sv Risk olika betydelser tr Risk anlam ayr m uk ...   more details



  1. Risk reduction

    Risk reduction may refer to Absolute risk reduction or Relative risk reduction , statistical descriptors of an intervention. Risk management Safety Integrity Level Hedge finance disambig Long comment to avoid being listed on short pages ...   more details



  1. Residual risk

    The residual risk is the risk or Risk danger of an action or an event, a method or a technical process that, although being abreast with science, still conceives these dangers, even if all theoretically possible safety measures would be applied scientifically conceivable measures . The formula to calculate residual risk is inherent risk x control risk where inherent risk is Coercion threat s vulnerability . In the economic context, residual means the quantity left over at the end of a process a remainder dictionary.com . In the property rights model it is the shareholder that holds the residual risk and therefore the residual profit . See also Disambiguation needed Risk analysis date June 2011 a residual risk is a portion of the risk that is left after a risk assessment has been conducted. External links http www.protecht.com.au risk management articles 64 the scoring of residual risk The Scoring of Residual Risk http www.protecht.com.au risk management articles 99 can residual risk be higher than inherent risk Can Residual Risk Be Higher than Inherent Risk? http www.economist.com research Economics alphabetic.cfm?LETTER R RESIDUAL 20RISK Economist.com http www.euronuclear.org info encyclopedia r residual risk.htm Euronuclear.org Category Risk de Restrisiko ...   more details



  1. Risk metric

    A risk metric is the abstract concept in financial risk management quantified by risk measure s. When choosing a risk metric, an agent is picking an aspect of perceived risk to investigate, such as volatility finance volatility or mean return. ref name Holton cite journal last Holton first Glyn A. year 2004 title Defining risk journal Financial Analysts Journal volume 60 issue 6 pages 19 25 url http www.riskexpertise.com papers risk.pdf format pdf accessdate March 11, 2012 ref Risk measure and risk metric In a general sense, a measure is an algorithm for quantifying something. A metric is our interpretation of the number. ref name glossary cite web author Glyn A. Holton year 2002 title Risk Measure and Risk Metric url http www.riskglossary.com link risk metric and risk measure.htm accessdate March 11, 2012 ref In other words, the method or formula to calculate a risk metric is called a risk measure. Value at risk metric The VaR risk metric summarizes the Probability distribution distribution of possible losses by a Quantile function quantile , a point with a specified probability of greater losses. ref name Jorion cite book last Jorion first Philippe title Value at Risk The New Benchmark for Managing Financial Risk edition 3rd publisher McGraw Hill year 2006 isbn 978 0071464956 ref Examples Standard deviation or volatility finance Volatility Mean Absolute deviation Expected shortfall Sharpe ratio Sortino ratio Value at risk See also Risk measure Coherent risk measure Deviation risk measure Spectral risk measure Distortion risk measure References Reflist Finance stub Category Financial risk ...   more details



  1. Reinvestment risk

    Unreferenced date December 2009 Financial risk types Reinvestment risk is one of the main genres of financial risk . The term describes the risk that a particular investment might be canceled or stopped somehow, that one may have to find a new place to invest that money with the risk being there might not be a similarly attractive investment available. This primarily occurs if Bond finance bonds which are portions of loan s to entities are paid back earlier than expected. Consequences The risk resulting from the fact that interest or dividends earned from an investment may not be able to be reinvested in such a way that they earn the same rate of return as the invested funds that generated them. For example, falling interest rates may prevent bond coupon payments from earning the same rate of return as the original bond. Pension funds are also subject to reinvestment risk especially with the short term nature of cash investments there is always the risk that future proceeds will have to be reinvested at a lower interest rate. See also Financial risk Liquidity risk Financial risk DEFAULTSORT Reinvestment Risk Category Finance ...   more details



  1. Legal risk

    Unreferenced stub date December 2009 cleanup date May 2010 Financial risk types Legal risk is risks that counterparty are not legally able to enter into a contract. Another legal risk relates to regulatory risk, i.e., that a transaction could conflict with a regulator s policy or, more generally, that legislation might change during the life of a financial contract. The Risk Principle The Risk Principle is an area of law closely tied to Causation in English law legal causation in negligence . It provides limits on negligence for harm caused unforeseeably. Financial risk DEFAULTSORT Legal Risk Category Financial risk Category Law by forum Finance stub ar id Risiko hukum ...   more details



  1. Reputational risk

    Financial risk types Reputational risk , often called reputation risk , is a type of risk related to the trustworthiness of business. Damage to a firm s reputation can result in lost revenue or destruction of shareholder value , even if the company is not found guilty of a crime. Reputational risk can be a matter of corporate trust, but serves also as a tool in crisis prevention. ref http www.ffiec.gov ffiecinfobase booklets retail retail 03b.html ref This type of risk can be informational in nature or even financial. Extreme cases may even lead to bankruptcy as in the case of Arthur Andersen . Recent examples of companies include Toyota , Goldman Sachs , Oracle Corporation and BP . The reputational risk may not always be the company s fault as per the case of the Tylenol cyanide panic after seven people died in 1982. ref http www.time.com time magazine article 0,9171,960693,00.html ref See also Reputation management Audit Enterprise risk management COSO ERM framework COSO framework, Risk management Quality audit Continuous auditing Center for Audit Quality References Reflist External links http www.protecht.com.au risk management articles 93 newsletter q3 2011 Reputation Damage Risk Event or Risk Consequence? http www.ffiec.gov ffiecinfobase booklets retail retail 03b.html U.S. FFIEC s definition http findarticles.com p articles mi m0ITW is 1 85 ai n14897163 Managing Reputational risk Financial risk Category Auditing Category Reputation management Risk de Reputationsrisiko ja ...   more details



  1. Specific risk

    Unreferenced stub auto yes date December 2009 Orphan date December 2009 In finance , a specific risk is a risk that affects a very small number of assets. This is sometimes referred to as unsystematic risk . In a balanced portfolio of assets there d be a spread between general market risk and risks specific to individual components of that portfolio. Determination of the extent of exposure to individual risks is made using models such as Treynor Black model Treynor Black in which the optimal share of a security is inversely proportional to the square of its specific risk. An example would be news that is specific to either one stock or a group of companies, such as the loss of a patent or a major natural disaster affecting the company s operation. Unlike systematic risk or market risk , specific risk can be diversified away.In fact, most unsystematic risk is removed by holding a portfolio of about twenty five to thirty securities. DEFAULTSORT Specific Risk Category Financial risk Finance stub de Unsystematisches Risiko fr Risque sp cifique ...   more details



  1. Equity risk

    Unreferenced stub date December 2009 Financial risk types Equity risk is the risk that one s investments will depreciate because of stock market dynamics causing one to lose money . The measure of risk used in the equity markets is typically the standard deviation of a security s price over a number of periods. The standard deviation will delineate the normal fluctuations one can expect in that particular security above and below the mean, or average. However, since most investors would not consider fluctuations above the average return as risk , some economists prefer other means of measuring it. Financial risk Category Stock market Risk Category Financial risk Econ stub vgvgv ar ...   more details



  1. Manufactured risk

    orphan date August 2009 Manufactured risks are risks that are produced by the modernization process, particularly by innovative developments in science and technology. They create risk environments that have little historical reference, and are therefore largely unpredictable. Manufactured risk produces a risk society . References Giddens, Anthony 1999 Risk and Responsibility Modern Law Review 62 1 4 Category Risk technology stub ...   more details



  1. Commodity risk

    one source date May 2010 Financial risk types Commodity risk refers to the uncertainties of future market value s and of the size of the future income , caused by the fluctuation in the prices of commodity commodities . ref citebook title Financial Sector Assessment author International Monetary Fund year 2005 publisher ISBN 0821364324 ref These commodities may be grain s, metal s, gas , electricity etc. A commodity enterprise needs to deal with the following kinds of risks Price risk Risk arising out of adverse movements in the world prices, exchange rates, basis between local and world prices Quantity risk Cost risk Input price risk Political risk Groups at Risk There are broadly four categories of agents who face the commodities risk Production, costs, and pricing Producers farmers, plantation companies, and mining companies face price risk, cost risk on the prices of their inputs and quantity risk Buyer s cooperatives, commercial traders and trait ants face price risk between the time of up country purchase buying and sale, typically at the port, to an exporter. Exporter s face the same risk between purchase at the port and sale in the destination market and may also face political risks with regard to export licenses or foreign exchange conversion. Governments face price and quantity risk with regard to tax revenues, particularly where tax rates rise as commodity prices rise generally the case with metals and energy exports or if support or other payments depend on the level of commodity prices. See also Fuel price risk management Sprott Molybdenum Participation Corporation Uranium Participation Corporation References refs Financial risk Category Financial risk Category Commodities Risk ...   more details



  1. Risk appetite

    Risk Appetite is a method to help guide an organisation s approach to risk and risk management . Definition The level of risk that an organisation is prepared to accept, before action is deemed necessary ... that change inevitably brings. Levels of risk appetite The appropriate level will depend on the nature ... to setting risk appetite that a business may adopt to ensure a response to risk that is proportionate given their business objectives. Averse Avoidance of risk and uncertainty is a key organisation objective. Minimal Preference for ultra safe options that are low risk and only have a potential for limited reward. Cautious Preference for safe options that have a low degree of risk and may ... business rewards, despite greater inherent risk. The appropriate approach may vary across an organisation ..., with an overarching risk appetite framework to ensure consistency. Measuring risk appetite Precise measurement is not always possible and risk appetite will sometimes be defined by a broad statement of approach. An organisation may have an appetite for some types of risk and be averse to others ... for different categories of risk. For example, it may aid a project to know what level of delay or financial ... and likelihood of risks, this can be used to define the maximum level of risk tolerable before action should be taken to lower it. Purpose and benefits By defining its risk appetite, an organisation ... guide people on the level of risk permitted and encourage consistency of approach across an organisation. A defined acceptable levels of risk also means that resources are not spent on further reducing risks that are already at an acceptable level. See also Enterprise risk management Risk management Risk References http www.protecht.com.au risk management articles 71 newsletter q1 2011 article Risk Appetite What and How? http www.hm treasury.gov.uk thinking about risk.htm http www.theirm.org publications risk appetite.html http www.ior institute.org education sound practice guidance 8 sound ...   more details



  1. Concentration risk

    Unreferenced date January 2007 Financial risk types Concentration risk is a bank banking term denoting the overall spread of a bank s outstanding accounts over the number or variety of debtor s to whom the bank has lent money. This risk is calculated using a concentration ratio which explains what percentage of the outstanding accounts each bank loan represents. For example, if a bank has 5 outstanding loans of equal value each loan would have a concentration ratio of .2 if it had 3, it would be .333. Various other factors enter into this equation in real world applications, where loans are not evenly distributed or are heavily concentrated in certain economic sectors. A bank with 10 loans, valued at 10 dollars a piece would have a concentration ratio of .10 but if 9 of the loans were for 1 dollar, and the last was for 50, the concentration risk would be considerably higher. Also, loans weighted towards a specific economic sector would create a higher ratio than a set of evenly distributed loans because the evenly spread loans would serve to offset the risk of economic downturn and Default finance default in any one specific industry damaging the bank s outstanding accounts. Risk of default finance default is an important factor in concentration risk. The basic issue raised by the concept of default risk is does the risk of default on a bank s outstanding loans match the overall risk posed by the entire economy or are the bank s loans concentrated in areas of higher or lower than average risk based on their volume, type, amount, and industry. Types of Concentration Risk There are two types of concentration risk. These types are based on the sources of the risk. Concentration risk can arise from uneven distribution of exposures or loan to its borrowers. Such a risk is called Name Concentration risk. Another type is Sectoral Concentration risk which can arise from uneven distribution of exposures to particular sectors, regions, industries or products. Financial risk economics ...   more details



  1. Risk-loving

    Unreferenced stub auto yes date December 2009 In economics and finance , a risk lover is a person who has a preference for risk . While most investment investors are considered risk averse , one could view casino goers as risk loving. If offered either 50 or a 50 chance of each of 100 and nothing, a risk seeking person would prefer the gamble even though the gamble and the sure thing both have the same expected value in fact, the risk lover would be indifferent to accepting a less than 50 chance of 100 versus the sure 50 how much less would depend on how risk loving the person is . The risk lover would also be indifferent to a 50 chance of each of X and nothing versus the sure 50, where X is some amount less than 100 again, how much less would depend on how risk loving the person is . The risk loving behavior can be observed in the negative domain math x 0 math for Prospect theory value functions, where the functions are convex for math x 0 math while the functions are concave for math x 0 math . The risk loving utility function Choice under uncertainty is often characterized as the maximization of expected utility . Utility is often assumed to be a function of profit or final portfolio wealth, with a positive first derivative . The utility function whose expected value is maximized is convex function convex for a risk lover, concave function concave for a risk averse agent, and linear for a risk neutral agent. Its convexity in the risk loving case has the effect of causing a mean preserving spread of any probability distribution of wealth outcomes to be preferred over the unspread distribution. DEFAULTSORT Risk Loving Category Business economics Category Risk Category Prospect theory Category Financial risk Category Economics of uncertainty Category Utility Category Personality Finance stub is h ttus kni ...   more details



  1. Active Risk

    morefootnotes date June 2011 Active Risk London Stock Exchange LSE ARI formerly known as Strategic Thought Group , is a software company that specialises in enterprise wide risk management ERM and governance, risk and compliance GRC software. Corporate history Strategic Thought was founded in 1987 as a specialist technology company in London, England. In 2001, Active Risk Manager ARM , enterprise wide risk management ERM and governance, risk and compliance GRC software was launched and today is the company s flagship product. The company is publicly listed on the London Stock Exchange Alternative Investment Market and has offices in Maidenhead, England and Herndon, Virginia . Active Risk Manager is used by major global organizations such as NASA , US Air Force , London Underground , EADS and Nestl . ARM was awarded Risk Management Application of the Year in 2010 at the global Risk Management Awards run in conjunction with the Institute of Risk Management . ref cite web url http rmprofessional.com rm risk management awards announced.php author Graham Buck date 2010 11 19 title Risk Management Awards 2010 announced accessdate 2011 06 13 publisher Rmprofessional.com ref In 2011, Strategic Thought Group re branded the company and is now known as Active Risk. ref cite web url http www.prfire.co.uk press release strategic thought group becomes active risk and renews its commitment to provide great risk management and enterprise grc software to customers 66200.html author Helen Spendlove date 2011 05 18 title Strategic Thought Group becomes Active Risk accessdate 2011 06 13 publisher prfire.co.uk ref References Reflist External links Official http www.activerisk.com Categories Category Articles created via the Article Wizard Category Risk management companies Category Risk management software ...   more details



  1. Basis risk

    Unreferenced date December 2009 Basis risk in finance is the risk associated with imperfect Hedge finance hedging using Futures contract future s. It could arise because of the difference between the asset whose price is to be hedged and the asset underlying the Derivative finance derivative , or because of a mismatch between the expiration date of the Futures contract futures and the actual selling date of the asset. Under these conditions, the spot price of the asset, and the futures price, do not converge on the expiration date of the future. The amount by which the two quantities differ measures the value of the basis risk. That is, Basis Spot price of hedged asset Futures price of contract Example Of Basis Risk Treasury bill future being hedged by two year Bond, there lies the risk of not fluctuating as desired. See also Risk Uncertainty Financial risk management List of finance topics DEFAULTSORT Basis Risk Category Financial risk ...   more details



  1. Risk neutral

    refimprove date December 2010 In economics and finance , risk neutral behavior is between risk aversion and risk seeking . If offered either 50 or a 50 chance of each of 100 and nothing, a risk neutral person would have no preference between the two options. In contrast, a risk aversion risk averse person presented with these options would accept some amount less than 50 in preference to the risky option, while a risk seeking person would accept a less than 50 chance of 100 in preference to the sure 50. Theory of the firm In the context of the theory of the firm , a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit with respect to its choices of labor input usage, output produced, etc. . But a risk averse firm in the same environment would typically take a more cautious approach. ref Sandmo, Agnar ... and Quantitative Analysis 7, September 1972, 1851 1872. ref a risk neutral investor able to choose ... its risk features relative to those of other assets, and would even short selling sell short the asset ... expected yield asset. In contrast, a risk averse investor would Diversification finance diversify among a variety of assets, taking account of their risk features, even though doing so would lower the expected return on the overall portfolio. The risk neutral investor s portfolio would have a higher expected return, but also a greater variance of possible returns. The risk neutral utility function ... . The utility function whose expected value is maximized is concave function concave for a risk averse agent, convex function convex for a risk lover, and linear for a risk neutral agent. Thus in the risk neutral case, expected utility of wealth is simply equal to a linear function of expected ... See also Rational pricing Risk neutral valuation Risk neutral valuation Risk neutral measure DEFAULTSORT Risk Neutral Category Risk Category Financial risk Category Economics of uncertainty Category ...   more details




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