RMI-2302 Study Guide - Comprehensive Midterm Guide: Homo Economicus, Risk Premium, Sunk Costs
7 Feb 2017
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Speculative risks: pure risks- involve only two potential outcomes, either loss or no loss, no possibility of gain, speculative risks- risks where you may have a loss or no loss, but also have a gain, static vs. Dynamic risk: static risks- are risks that are unchanging through time, they do(cid:374)"t (cid:272)ha(cid:374)ge fro(cid:373) day to day or eve(cid:374) year to year, dynamic risks- risks that are changing through time, fundamental vs. Learning objectives: explain how risk is viewed differently at the societal level, describe the risk/reward trade off, summarize the 5 rules to minimize innovation risk. Risk and return trade-off: the riskiness of an innovation depends on the choices people make. The more informed their choices, the lower the risk will be. Innovations to make us feel safer often lead to us changing our habits because we feel safer. 5 rules of thumb to minimize risk: 1. Recognize that you need a model: 2.
