An Introduction to Fast REP (Risk Evaluation & Profiling)
- Tags:
- Deviation,
- Strategy,
- Security,
- Risk Management,
- Outcome,
- Oncept,
- Management,
- Financial Services,
- Financial Planning,
- Finance,
- ...
- Source:
- Oncept
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Overview: It is relatively simple to compare and choose among alternatives in a deterministic world because there is no uncertainty: what you see is what you get. Uncertain outcomes with their attendant distributions complicate the comparison effort. In the world of investments it is generally agreed that high mean rate of return is desirable as is low variance of return. The fast REP (Risk Evaluation and Profiling) framework preserves the mean-variance comparison aspect of the Markowitz model but shifts the focus from an investment orientation to a risk management perspective. In doing so, it borrows some characteristics from the Value-at- Risk (VaR) framework as well. Making an approximate connection between tail-end probability and standardscore, the fast REP concept provides a powerful graphical approach to contrast/compare uncertain outcomes with different mean and variance in a mean-standard deviation diagram. Fast REP methodology quickly compares the tail end probability of some undesirable outcomes when different policies/strategies are employed/implemented. Alternatives with equivalent risk profile can be easily identified as a straight line in the mean-standard deviation diagram.
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Format: PDF | Size: 40KB | Date: Oct 2001 | Pages: 8
