Chapters 5-8. Risk Assessment: Tools and Techniques
Risk management begins with the assessment of risk. In the past 50 years, the confluence of developments in economic and financial theory with computing and data advancements has allowed us to develop new tools for assessing risk and improve existing ones. On the one hand, portfolio theory and risk and return models (such as the capital asset and arbitrage pricing models) have allowed us to become more sophisticated in adjusting the expected value of risky assets for that risk. Chapter 5, “Risk-Adjusted Value,” provides a broad overview of the choices when it comes to risk-adjusting the value. The decision sciences and statistics have contributed their own tools to risk assessment. Chapter ...
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