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A Commonly Used Method of Analyzing the Creditworthiness of a Potential

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A commonly used method of analyzing the creditworthiness of a potential customer is to analyze their financial statements.


Definitions:

Covariance

A statistical measure of the directional relationship between the returns of two assets.

Expected Return

The mean of all potential outcomes for an investment, adjusted based on the probability of each scenario occurring.

Standard Deviation

A metric assessing how much a group of data points or investment yields spread out or differ from each other.

Investment Opportunity Set

The range of possible investment options available to an investor, based on their risk tolerance and investment objectives.

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