1. Risk and Hedging Flashcards
1
Q
- What is Risk?
A
Risk involves uncertainty about outcomes and their significance to utility.
2
Q
- Risk vs Probability
A
Risk combines probability and the consequences of an event.
2
Q
- Risk vs Threat
A
Threat is a potential harm; risk involves the likelihood of harm and its consequences.
3
Q
- Components of Risk Assessment
A
Threat assessment, vulnerability assessment, and consequences.
4
Q
- Risk vs Negative Outcomes
A
Some views define risk by downside outcomes, while others consider all variability.
5
Q
- Risk in Finance
A
Variability of returns around the expected return, encompassing both gains and losses.
6
Q
- Risk-Return Tradeoff
A
Higher risk often correlates with higher expected returns.
7
Q
- Systematic vs Non-Systematic Risk
A
Systematic risk is non-diversifiable; non-systematic risk is diversifiable.
8
Q
- Efficient Frontier
A
Portfolios on the frontier optimize return for a given risk.
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