The theme on this board is risk in all its forms.What it is, what kinds of it there are, the relationship between risk and return, why when and how to avoid risk, when to embrace risk.Suggested topics of discussion include:- What is the "right" risk tolerance to have,- The "efficient frontier" and other theoretical ideas,- Relevant books like "Against the Gods"- Getting to the magical "Northwest Quadrant"- Hedging strategies: Stop-loss, option buying, futures, taking an opposite position in the relevant indexBut any topic relating to risk is welcome.
Definitely a subject of interest. Glad to discover the board.I'll be back, and plan to contribute........ after a week of vacation, during which I will be reading "Devil Take The Hindmost," a history of speculation.mathetes
My definition of risk is relatively simple.Risk has two components, the probability of an event happening and the consequences of that event should they occur.in my opinion, the financial community spends way too much time trying to quantify the former. it's interesting, because in engineering, we are the opposite, we spend the majority of our time studying the potential consequences.tr
Shouldn't it be a continuum: All sorts of events could have an impact, and each of them has a probability. You could even subdivide it to the penny.That's kind of ridiculous: in my case, when I retire, I could have assets from zero to $100 million (the last assumes I found an Internet startup and cash out before the bubble bursts.)How in the world can I assign a "value of consequences" to each of the 100 million possible events? It does not have meaning to me.Of course for many people (my parents) it does.
as i tell my students and the younger engineers who work for me - "mathematical complexity is not an excuse to abandon methodology".if it gets too big for a spreadsheet - then monte carlo it or conversely - simplify it back to a manageable level.tr
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