Lecture 10: Principles of Risk Management Ref.to ch.10 THE COURSE OF FINANCE 2017 SPRING SJTU
Lecture 10: Principles of Risk Management Ref. to ch.10 THE COURSE OF FINANCE 2017 SPRING SJTU 1
D Objectives Risk and Financial Decision Making(10.1/2) Conceptual Framework for Risk Management(10.3/4/5/6) .How to measure risks(10.7/8/9) THE COURSE OF FINANCE 2017 SPRING SJTU 2
THE COURSE OF FINANCE 2017 SPRING SJTU 2 Objectives •Risk and Financial Decision Making(10.1/2) •Conceptual Framework for Risk Management (10.3/4/5/6) •How to measure risks(10.7/8/9)
Chapter 10 Contents 10.1 What is Risk? 10.2 Risk and Economic Decisions 10.3 The Risk-Management Process 10.4 The Three Dimensions of Risk Transfer 10.5 Risk Transfer and Economic Efficiency 10.6 Institutions for Risk Management 10.7 Portfolio Theory:Quantitative Analysis for Optimal Risk Management 10.8 Probability Distributions of Returns 10.9 Standard Deviation as a Measure of Risk THE COURSE OF FINANCE 2017 SPRING SJTU
Chapter 10 Contents 10.1 What is Risk? 10.2 Risk and Economic Decisions 10.3 The Risk-Management Process 10.4 The Three Dimensions of Risk Transfer 10.5 Risk Transfer and Economic Efficiency 10.6 Institutions for Risk Management 10.7 Portfolio Theory: Quantitative Analysis for Optimal Risk Management 10.8 Probability Distributions of Returns 10.9 Standard Deviation as a Measure of Risk THE COURSE OF FINANCE 2017 SPRING SJTU 3
Introduction Recall that the three pillars of finance are Time value of money Asset valuation Risk management Many financial decisions are,in essence,the determination of an asset's risk!!！ SJTU Foundations of Finance 2016
Introduction Recall that the three pillars of finance are Time value of money Asset valuation Risk management Many financial decisions are, in essence, the determination of an asset’s risk!!! SJTU Foundations of Finance 2016 4
10.1 What is Risk? Distinguish risk and uncertain Uncertainty You can not know something for sure at a given time (based on the current information) ■ Risk is uncertainty that“matters”because it affects people's welfare. THE COURSE OF FINANCE 2017 SPRING SJTU 5
10.1 What is Risk? Distinguish risk and uncertain n Uncertainty You can not know something for sure at a given time (based on the current information) n Risk is uncertainty that “matters” because it affects people’s welfare. THE COURSE OF FINANCE 2017 SPRING SJTU 5