Sigma Risk

Op Eds

Op Eds on Risk

Using Behavioral Economics to Quantify Risk Appetite

As with most behaviors, risk aversion has its roots in human cognition; it’s part of our DNA. Accordingly, this opinion piece will examine the behavioral economics of risk aversion, extracting what we as risk managers can learn and then apply to the important enterprise risk management (ERM) areas of risk tolerance and risk appetite. It gets a bit technical, but not too much math. Let’s start with the fundamental economic concept of utility. 

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Jack Gordon