9
Risk IV: Downside risk
- Did we ask what is risk?
- Problems with the standard deviation
- One step in the right direction
- The semideviation
- A brief digression on the semideviation
- VaR
- The big picture
- Excel section
As much as we can very quickly agree on how to assess the return performance of an asset, we may have far more trouble agreeing on how to assess its risk. There are many ways to do it and which one is best, whatever that means anyway, is arguable. And yet at least one thing we can safely say: Although investors tend to associate risk with negative outcomes, the two factors most widely used to assess it, standard deviation and beta, do not. In this chapter we’ll discuss a relatively new but increasingly popular framework that focuses ...
Get The Financial Times Guide to Understanding Finance, 2nd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
