Risk Assessment - Qualitative Risk Measurement

Question 1

What do we need qualitative risk measurement?

Answer 1

-In many cases a direct monetary measurement or the specification of probabilities is not possible.
e.g. by measuring default risk

Scoring Models offers a solution

Question 2

Describe briefly the steps in applying a scoring model

Answer 2

Step 1: Determination of factor weights through pairwise comparison:

Specify a subjective preference structure

Step 2: Operationalization - Make things measurable

A higher score in this model implies a lower/higher risk.
- A Point value range of X to Y is used

Step3: Assess alternatives

Question 3

What is the idea of adjustments?

Answer 3

Adjustment is necessary if one factor has a sum of zero. Always the case if the preference structure is transitive.

Question 4

Describe briefly the further use of the scoring model.