Risk management, optimal

Torre, Andrew 2014, Risk management, optimal. In Marciano, Alain and Ramello, Giovanni Battista (ed), Encyclopedia of law and economics, Springer, New York, N.Y., pp.1-10, doi: 10.1007/978-1-4614-7883-6_60-2.

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Title Risk management, optimal
Author(s) Torre, AndrewORCID iD for Torre, Andrew orcid.org/0000-0002-8701-5840
Title of book Encyclopedia of law and economics
Editor(s) Marciano, Alain
Ramello, Giovanni Battista
Publication date 2014
Chapter number 99
Total chapters 117
Start page 1
End page 10
Total pages 10
Publisher Springer
Place of Publication New York, N.Y.
Keyword(s) financial risk
operational risk
systemic risk
Summary Individuals continually confront a discrepancy between ever expanding and changing wants and the means that they have at their disposal, time, and income, to satisfy them. One of the consequences is the need to make constrained choices between alternatives that have uncertain outcomes. Risk is a different concept from uncertainty. Individual optimal risk management means reducing, eliminating, or fully bearing risk, after conducting a “cost-benefit” analysis. In practice, however, cognitive biases mean that many decisions are not economically rational, necessitating paternalistic government and judicial interventions. Systemic, or whole financial system collapse risk is, optimally managed using well-designed macroprudential regulatory tools. The source of this type of risk is the inherent dynamics of the financial system over the course of the business cycle, interacting with credit market negative externalities, often as in the case of the GFC, spawned by government regulatory failure
ISBN 1461477522
Language eng
DOI 10.1007/978-1-4614-7883-6_60-2
Field of Research 140299 Applied Economics not elsewhere classified
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category BN Other book chapter, or book chapter not attributed to Deakin
ERA Research output type B Book chapter
Copyright notice ©2014, Springer
Persistent URL http://hdl.handle.net/10536/DRO/DU:30069461

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