What Is the Difference Between Standard Deviation and Value at Risk

question 78

Essay

What is the difference between standard deviation and value at risk? Consider the difference between purchasing a one-year bank CD compared with purchasing a homeowner's insurance policy. Which scenario do you believe is more likely to consider value at risk over standard deviation? Explain.

---

Definitions:

Practical

Concerned with actual use or application rather than theory or ideas; focusing on what is effective or achievable in real situations.

Kurt Lewin

A seminal figure in psychology, known for being one of the founders of social psychology and for developing theories related to group dynamics and organizational development.

Psychoanalytic

Refers to a theory of psychology that emphasizes unconscious determinants of behavior and the importance of childhood experiences.

Gestalt

A psychological theory suggesting that an organized whole is perceived as more than the sum of its parts, emphasizing pattern and context in perception.