What Are the Three Basic Methods of Dealing with Risk

question 37

Essay

What are the three basic methods of dealing with risk in the risk management process?

---

Definitions:

At-The-Money Call

An option contract with an exercise price that is approximately equal to the current price of the underlying asset.

Out-Of-The-Money Call

Refers to a call option where the strike price is higher than the market price of the underlying asset.

Treynor-Black Model

A portfolio optimization model that blends active and passive investments to optimize risk-adjusted returns.

Alpha Coefficient

A measure of the performance on a risk-adjusted basis, identifying the excess return of an investment relative to the return of a benchmark index.