An understanding of risk and how to deal with it is an essential part of
modern economics. Whether liability litigation for pharmaceutical firms
or an individual's having insufficient wealth to retire, risk is
something that can be recognized, quantified, analyzed, treated--and
incorporated into our decision-making processes. This book represents a
concise summary of basic multiperiod decision-making under risk. Its
detailed coverage of a broad range of topics is ideally suited for use
in advanced undergraduate and introductory graduate courses either as a
self-contained text, or the introductory chapters combined with a
selection of later chapters can represent core reading in courses on
macroeconomics, insurance, portfolio choice, or asset pricing.
The authors start with the fundamentals of risk measurement and risk
aversion. They then apply these concepts to insurance decisions and
portfolio choice in a one-period model. After examining these decisions
in their one-period setting, they devote most of the book to a
multiperiod context, which adds the long-term perspective most risk
management analyses require. Each chapter concludes with a discussion of
the relevant literature and a set of problems.
The book presents a thoroughly accessible introduction to risk, bridging
the gap between the traditionally separate economics and finance
literatures.
