Chapter 34 Volatility and Risk Measures—A Point of View

From an investment point of view, risk is about the potential to lose money. Other risk measures are just ways of trying to analyze the probability of losing money. Changes in the business world should cause people to be careful how they analyze risk because so many risk models are based on using data from the past. The linkages between this older data and the current markets are likely to be different and you need to take some time analyzing the current period to see what risk measures really apply.

While loss is the real risk in an investment, it is quite common to use volatility as a measure of risk. Changes in the value of an asset and the comparison of the value between two assets are ...

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