Question

Case: Sport Obermeyer

2. Can you come up with a measure of risk associated with your ordering policy? This measure should be quantitable.

Answer 1

Measure of risk : means evaluate the magnitude of the risk. It is a process used to measure the risk associated with the investment. It is helpful in making investment decisions.

Examples of measure of risk : value at risk , standard deviation, conditional value at risk, expected shortfall, super hedging price etc.

The measure of risk associated with ordering policy can be standard deviation. It measures the dispersion of data from its expected value. If value of standard deviation is high that means the risk is also high and if the value is low that means the risk is also low. so it is helpful in making investment decision to measure the risk.