Ch 5: Risk Measurement & Metrics

About This Chapter

Study risk measurement and metrics to catch up in class or get through an assignment with help from this engaging chapter. When you access this chapter, you'll find short lessons, self-assessment quizzes and help from one of our experts if you need it.

Risk Measurement & Metrics - Chapter Summary

Work through this helpful chapter at your own pace as you study risk measurement and metrics. Just a few of the subjects that you'll find here include five principal risk measures in risk management and using and understanding cost-benefit analysis. All of our resources are written by professional instructors so that you can understand these topics easily. The lesson quizzes and chapter test offer assistance helping you discover any areas that need more work. Feel free to reach out to an expert through the Dashboard if you need it. After you complete this chapter, you should be ready to:

  • Define risk-return analysis and its methods
  • Provide an overview of RiskMetrics methodology
  • Discuss the approaches in risk-adjusted return on capital
  • Outline scenario analysis and stress testing in risk management
  • Define predictive analysis and provide examples
  • Detail common measures of risk in risk management
  • Identify the applications for capital adequacy ratio (CAR)

9 Lessons in Chapter 5: Risk Measurement & Metrics
Test your knowledge with a 30-question chapter practice test
Five Principal Risk Measures in Risk Management

1. Five Principal Risk Measures in Risk Management

How can investors manage risk? In this lesson, we'll take a look at the five major risk measures in risk management: alpha, beta, r-squared, standard deviation, and the Sharpe ratio. We'll also examine how they are used.

Risk-Return Analysis: Definition & Methods

2. Risk-Return Analysis: Definition & Methods

To get a higher return in the investment world you have to take more risk. Two tools that help the investor balance the two are the capital allocation line and the efficient frontier. Let's see how these tools work with examples and illustrations.

Understanding & Using Cost-Benefit Analysis

3. Understanding & Using Cost-Benefit Analysis

This lesson will introduce the concepts, advantages, and disadvantages of cost-benefit analysis. Although the cost-benefit analysis is an excellent tool, we shall see that not all costs and benefits can easily be assigned monetary values.

RiskMetrics Methodology: Overview & Analysis

4. RiskMetrics Methodology: Overview & Analysis

Measuring the risks of investments and portfolios of investments has long been an area of interest for investors. Risk metrics came along in 1994 and standardized the process for quantifying risk. A few examples of how will follow.

Capital Asset Pricing Model (CAPM): Definition, Formula, Advantages & Example

5. Capital Asset Pricing Model (CAPM): Definition, Formula, Advantages & Example

Learn about the Capital Asset Pricing Model (CAPM), one of the foundational models in finance. We'll look at the underlying assumptions, how the model is calculated, and what it can do for you.

Overview of Scenario Analysis & Stress Testing in Risk Management

6. Overview of Scenario Analysis & Stress Testing in Risk Management

Scenario analysis can tell us what a particular set of circumstances will do to our finances. It helps individuals make decisions and is common in business. We will construct some scenarios and also look at extreme scenarios called stress tests.

Predictive Analysis: Definition & Examples

7. Predictive Analysis: Definition & Examples

If you've had a Google search finish your thoughts, you've seen predictive analysis in action. The crux of predictive analysis is the question: What might happen? We'll provide some more detail and examples.

Capital Adequacy Ratio (CAR): Definition & Applications

8. Capital Adequacy Ratio (CAR): Definition & Applications

In this lesson, we'll define bank reserves and capital adequacy ratio. You'll learn the importance of CAR and its formula. We'll also discuss which entities established and evaluate CAR.

Required Assignments Reminder

9. Required Assignments Reminder

Sorry for the interruption to your course progress! We wanted to make sure you knew this course has a written assignment requirement in order to be completed. Read on to learn where to find these assignments and how to submit them.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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