Value-at-Risk Theory and Practice

Chapter 1, Page 21
Exercise 2

Give an example of a situation that entails uncertainty but not exposure, and hence no risk.

 

 

 

Solution

Many answers are possible for this exercise. Consider the following:

A spectator watches a man walk unprotected on a tightrope. The spectator is uncertain whether the man will fall, but is not personally exposed to a fall. Uncertain but not exposed, the spectator does not face risk.

 

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