Week 2: Closing thoughts
In this short video, Pasquale Scaramozzino summarises the topics covered in Week 2. Among other topics, he outlines how by constructing balanced and well-diversified portfolios we can significantly reduce the …
Course: Risk Management in the Global Economy
How does Islamic finance differ from conventional finance?
How does Islamic finance differ from conventional finance? The main difference between Islamic and conventional finance is the treatment of risk, and how risk is shared. In this article, we …
How is risk managed in Islamic Finance?
Why talk about Islamic finance? It represents a small but growing element in the world’s financial systems, whose key tenets date back centuries. But how compatible are they to modern …
Behavioural finance: what are heuristics?
When you make decisions, do you research all the relevant information, do you consider the possible outcomes, do you weigh up the pros and cons, and do you feel you …
Do investors always follow the rules of rational financial investment?
According to many traditional theories of finance, the average investor generally adopts an unbiased decision-making process in line with the rules of rational investing. But what are these rules, and …
Understanding Capital Asset Pricing Model
This article discusses the capital asset pricing model and how to use the formula. When considering the risk of financial security, we may wish to ask the following questions: What …
How Does Diversification Work?
In this article, we will focus on how to use diversification to reduce the risk of a portfolio. It will give you a clearer picture of how you can reduce …
Diversification of Risk
Here is a question for you. You are creating a portfolio containing two assets, choosing from three potential stocks: a company making umbrellas, a raincoat company, and an ice-cream company. …
What is the appropriate measure of risk of a financial security?
The key idea in portfolio analysis is that when investors are trying to establish the value of their wealth, they must consider their assets as a whole. This also offers …
The Risk of Financial Assets
Which is of great importance: what would happen to the riskiness of an asset, and to our measure of risk, if extreme returns became more likely? Suppose there is a …
Return and Risk of Financial Securities
Before we consider the risk of a portfolio of assets, we have to look at the risk of the individual securities which are included in the portfolio. This activity will …
How do we measure the risk of a financial security?
The modern approach to financial risk takes the view that any investment in financial securities is associated with an uncertainty about its outcome. While we can’t predict with certainty the …
How can risk be managed?
Risk is about unpredictable events: how can it possibly be managed? In this short video, Prof Pasquale Scaramozzino explores how applying a statistical approach to risk management can significantly reduce …
How To Calculate the Returns of Assets in Financial Portfolios
When we invest in a financial asset over a period of time, we receive a return on this asset. This return can be positive, in which case we make a …
Week 2: Introduction
The very idea of managing risk may strike us as a paradox: how can we possibly manage what is unpredictable? Is it possible to manage risks at all? Lead Educator …
