Risk tolerance: Difference between revisions
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imported>Doug Williamson (Align with Enterprise risk management page.) |
imported>Doug Williamson (Expand 2nd definition.) |
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In this strict sense, risk tolerance is the amount of risk that the firm can actually bear. | In this strict sense, risk tolerance is the amount of risk that the firm can actually bear. | ||
This amount could be represented by | This amount of risk could be represented by the firm's capital, or by an amount of capital above a base amount of capital that cannot be put at risk. | ||
2. | 2. | ||
The term is also sometimes used | The term 'risk tolerance' is also sometimes used in a looser sense, to mean the same as 'risk appetite'. | ||
Latest revision as of 11:33, 2 April 2019
Risk management.
1.
Strictly, an absolute maximum acceptable level of risk.
In this strict sense, risk tolerance is the amount of risk that the firm can actually bear.
This amount of risk could be represented by the firm's capital, or by an amount of capital above a base amount of capital that cannot be put at risk.
2.
The term 'risk tolerance' is also sometimes used in a looser sense, to mean the same as 'risk appetite'.
