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Could you please clear my doubt regarding risk & uncertainty? Are these below all true?
1) Risk seekers are those investors who are interested in the best possible outcome from the best options available?
2) Risk Avoider are those investors who are interested in the worst possible outcome from the best options available?
3) Risk Neutral are those investors who are interested in the average outcome from all the options available?
4) All these attitudes are related to risk which is used to mitigate the risk in the decision-making but what about whether these approaches deal with uncertainty or not?
Does the examiner use risk & uncertainty interchangeably? And all these approaches are used to deal with both of them?
What you have written for 1 to 3 is correct.
For 4, none of the approaches mitigate the risk. It is just that the attitude to risk determines the way the decision is made.
The examiner does use risk and uncertainty interchangeable. Strictly risk is when we know the probabilities of different outcomes whereas uncertainty is where we do not know the probabilities.
What you have written for 1 to 3 is correct.
For 4, none of the approaches mitigate the risk. It is just that the attitude to risk determines the way the decision is made.
The examiner does use risk and uncertainty interchangeable. Strictly risk is when we know the probabilities of different outcomes whereas uncertainty is where we do not know the probabilities.
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