BBG E231 Chapter Notes - Chapter 1: Risk It, Negative Approach
Document Summary
Financial and non-financial risks the term risk, in its context, includes all those situations in which there is an exposure to adversity. Risk is financial where the adversity involves the financial loss and it is non- financial where no financial loss is involved. Dynamic risks result from changes in the economy e. g. changes in price levels, consumer tastes, income and output, and technology may cause a financial loss to some members. These risks may occasion financial loss to the population. However in the long term, they benefit society as they are consequences of adjustments to misallocation of resources. Dynamic risks occur without any precise degree of regularity and are. Static risks are those which involve losses whether or not there are changes in the economy therefore less predictable. e. g. dishonesty of other individuals, perils of nature. They do not benefit society and are generally predictable because they tend to appear over time with a reasonable degree of regularity.
