Question

What are some risk management techniques? How would you use portfolio management to assess an investment's risk and return? Predict how the results would be different based on different risk preferences.

Answer 1

Answer :-

The Risk Management Techniques are as follows :-

1. Risk Avoidance

2. Risk Transfer

3. Risk Mitigation

4. Risk Acceptance

A Portfolio management is used to assess an investment's risk and return with the help of Standard deviation and find out the Expected Return.

A Standard Deviation helps to measure the risk over the actual returns . That Standard deviation is just simply the square root of the variance. The Variance is to be calculated by finding out the diffrence of the actual returns and the expected return and then total the square of these diffrences then the variance comes.

The results are different based on the different risk prefrences as Risk is to be taken after the analysis of the return, If there is a high return then the person is ready for taking the high risk and if there is a low return then the person can take the risk accordingly.