Financial risk modelling
What is financial risk modelling?
It’s a system to help you predict the financial outcome for any stock, portfolio or company by assessing the likelihood and scale of risk involved. The idea is to accurately identify the dangers, and explore how each of the risk factors could affect the outcome of the activity.
Where have you heard about financial risk modelling?
Employing a risk modelling strategy can help investors and businesses determine if the overall level of risk associated with an action can be justified by the potential rewards at the end.
What you need to know about financial risk modelling.
For investors, risk can be classed as either systematic or unsystematic. Systematic risks are those risks that are likely to affect an entire market, such as interest rate changes. Unsystematic risks are specific to individual asset classes or industries.
A risk model will assess the past performance of securities, along with their current status in the market and potential for the future.
While risk modelling can be time-consuming, if it helps you avoid serious financial damage, you might consider it worthwhile.