Robust Risk Measurement from a Qualitative Point of View

By: Ennio Rapisarda

To evaluate the riskiness of an investment portfolio, we must correlate the term ”risk” to the variability of the future value of a position, due to market changes or more generally to uncertain events.

Here the risk can be defined as the volatility of unexpected outcomes, generally the value of assets or liabilities of interest. In our case we are focusing in financial risks, defined as those which relate to possible losses in financial markets, such as losses due to interest rate movements or default on financial obligations. Financial managers must necessarily understand risk, that is the chance to can consciously plan for the consequences of adverse outcomes and, by so doing, be better preparated for the inevitable uncertainty.

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