Understanding Risk - Lezione 4 Monetary Flashcards
What is RISK?
Risk is the way you are measunring and uncertainty about the future of a investment, so the payoff we are goint to get at the end and the evaluation if the time horizon of the investment itelsf.
To manage the risk, there is some probability calculations.
The first une is given by a number between 0 and 1 as a the probability of a given event is going to happen or not, where 0 is the indicator of less riskness, while the more we get closer to 1 and the more the risk is going to get high.
What is the Benchmark?
It is an Index, usually used in financial market but not only, used to understand the risk of a certain investment. The characterists of the benchmark are mostly 3:
Replicability: because it has to be the calulated in the same way on order to compare all the investments in a unambiguous way.
Representability: in order to really be usefull it has to be rapresentative of the group of investments we are talking about. So the secureties we take in consideration to find out this index must be representative of that specific market
Transparence: becasue has to be easly used by any investor
Esempio of index FTSE MB (futsie Mib) benchmark representative of Borsa italiana take in account the shares of Banca Intesa, Enel, Eni, Unicredit….e molti altri.
