R. M.

is all about
1) What is Risk? Why Business individuals tend to be Averse to it? 2) The alternatives that are available for managing Risk? How to use them? 3) The extent to which unaided intution is adequate for managing Risks 4) Whether & When Quantitative methods are useful for managers facing Risky Decisions?

R. M. Methods and Approaches are (Tools) Diversification (including Portfolio construction and Capital Asset Pricing Model) Insurance Hedging Futures and option Markets Capital Budgeting. Risk Measurement encompasses three different strands of academic Research into Risk. Decision analysts have developed techniques like. Decision trees. Subjective Probability Distribution. Preference Curves To aid a Manager Choosing between Risky alternatives.

Financial Theory
Provides Techniques for establishing fair market equilibrium Prices for Risks assets and Tools such as CAPM Risk Adjusted discounting Option Pricing formulas.

 Psychological Approach How People actually behave when confronted with Risk and have identified systematic cognitive biases that lead to the drawing of false conclusion in problem Sinvolving uncertainity. Just as the mind can be fooled by dilemmas involving uncertainity, so too can it be trained to avoid the cognitive pitfalls that impede effective decision making. Psycholigical concerns affect judgment when the stakes are high, and no less so when the extreme consequences arefinancial rather than medical. Covers various intangible components of aversion and thereby offer an explanation of why actual behaviour does not always match economically rational behavior