IMPLEMENTING QUANTITATIVE TECHNIQUES IN ASSESSING THE RISK ATTITUDES

Abstract

The financial risk does not only affect the future of a company, but also the dynamic of the economy itself. Therefore, a thorough examination of the risk in the decision-making process of a company represents a substantial aspect. Although research in this direction has been made, most of the approaches neither integrate qualitative variables with the measurable ones, nor consider historical data of the companies that are being evaluated. The empirical management has evolved, allowing us to compare and choose from different quantitative techniques in order to find answers to complex managerial problems. No matter the context, the decision-making process cannot be established without a comprehensive analysis of information that helps explaining trends, relationships and changes that can occur in the variables. Risk assessment expects that the term of risk to be defined not only in an explicit way, but also in a determinable way. The aim of this paper is to contribute to the advancement of the theory, but also to strengthen the practical utilization, being helpful in upgrading the research on risk. By finding the most suited models and techniques for an optimal risk assessment, the companies can benefit from having a rational support in the investment process.

Keywords

• quantitative risk models
• bowman’s paradox
• prospect theory
• risk-return association