Description
Your task this week is to write a research paper discussing the concept of risk modeling. Please also evaluate the importance of risk models. Lastly, construct an approach to modeling various risks and evaluate how an organization may make decisions about techniques to model, measure, and aggregate risks.
Your paper should meet the following requirements:
• Be a minimum of 3 pages in length, not including the required cover page and reference page.
• Follow APA guidelines. Your paper should include an introduction, a body with fully developed content, and a conclusion.
• Support your answers with the readings from the course and at least two scholarly journal articles to support your positions, claims, and observations, in addition to your textbook. The UC Library is a great place to find resources.
• Be clearly and well-written, concise, and logical, using excellent grammar and style techniques. You are being graded in part on the quality of your writing.
Explanation & Answer
hi, kindly find attached.
Running Head: RISK MODELLING
1
Risk Modelling
Student’s Name
Institution Affiliation
Date
RISK MODELLING
2
Risk Modelling
Introduction
Risks are part of the business environment, which is why organizations and investors
need to be well versed in this concept. Risks indicate the likelihood of the outcome differing
from the expected outcome, i.e., the profits made from the investment will be lower than
expected. When evaluating risks in an organization, the organization should consider historical
information. When computing the risk, one should use the standard deviation metric. This metric
looks at the volatility of prices by looking at the historical averages for a specific period. A lower
standard deviation often indicates low volatility, which means that the risk involved is low. A
higher standard deviation, on the other hand, often indicates high volatility, which means that the
risk involved is high. The process of determining whether the business is at risk is called risk
modeling. An organization should master the concept of risk modeling to ensure that they do not
engage in behaviors classified as high risk.
The Concept of Risk Modelling
Organizations are often advised to use risk models to determine their level of risk. A risk
model is a mathematical representation containing probability distributions (Bernhard,...
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