文档介绍：Chapter 10: An Overview of Risk Management
Objective
Risk and Financial Decision Making
Conceptual Framework for Risk Management
Efficient Allocation of Risk-Bearing
What is Risk?
Risk and Economic Decisions
The Risk Management Process
The Three Dimensions of Risk Transfer
Risk Transfer and Economic Efficiency
Institutions for Risk Management
Portfolio Theory: Quantitative Analysis for Optimal Risk Management
Probability Distributions of Returns
Standard Deviation as a Measure of Risk
Contents
Roles of Risk Management
One of the three analytical “pillars” to finance
Risk allocation (redistribution)
Concept of Risk
Uncertainty that is “bad”
Illustration: preparing foods for party
Gains or losses: “upside” potential or “downside” possibility
Risk Aversion
Prefer lower risk given same expected value
Diminishing marginal utility of e
A measure of willingness to pay to reducing risk
A characteristic of one’s preference in risk-taking situations
Rational behavior assumed to be risk-averse
Risk Management
The process of formulating the benefit-cost trade-offs of risk reduction and deciding on the course of action to take
The appropriateness of a risk-mgmt decision: judged in the light of the information available
Skill or lucky of a decision-maker?
Risk Exposure
Particular types of risk one faces due to one’s circumstances
Illustrations:
Farmer: a crop failure and a decline in the price
house owner: fire, theft, storm or earthquake damage, a decline of house price
Importer/exporter: change of currency exchange rate
Assessing risk exposure in context
Speculate and Hedge
Speculate: taking positions that increase exposures to certain risks
Hedge: measures that reduce risk exposures
Risks Exposure for Households
Sickness, disability, and death
Unemployment
Consumer-durable asset risk
Liability risk
Financial-asset risk
Risks Facing Firms
Production risk
Price risk of outputs
Price risk of inputs