Question
Risk means, in today's language, the probability of something bad happening or an unfortunate outcome. Risk in finance, however, is defined as the variance of
Risk means, in today's language, the probability of something bad happening or an unfortunate outcome. Risk in finance, however, is defined as the variance of the probability distribution of returns.
a) Why do these definitions seem contradictory?
b) Reconcile the two ideas.
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Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
