New Vistas in Risk Profiling

Download or read book New Vistas in Risk Profiling written by Greg B. Davies and published by CFA Institute Research Foundation. This book was released on 2017-08-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk profiling is fraught with misunderstandings that lead to ill-advised approaches to determining suitable investment solutions for individuals. The author discusses how we should think about the crucial elements of (a) risk tolerance, (b) behavioural risk attitudes, and (c) risk capacity. He uses a simple thought experiment to examine a stripped-down investor situation and define the essential features and exact role of each of the components of an investor's overall risk profile. He examines options for eliciting and measuring risk tolerance and considers some promising avenues for future methods.