Seeing Tomorrow: Rewriting the Rules of Risk

Seeing Tomorrow: Rewriting the Rules of Risk
ISBN-10
0471436976
ISBN-13
9780471436973
Category
Business & Economics
Pages
272
Language
English
Published
2001-06-01
Publisher
John Wiley & Sons
Authors
Andrew Freeman, Ron S. Dembo

Description

In high-stakes investing and business, success or failure largelydepends on how well you play the game of risk-a game in which therules of competition are constantly being rewritten. Strategiesthat proved effective in the past are no longer enough to wintoday. The key to success is not to rely on yesterday's news, butto peer into the future and ask what could happen tomorrow. Presenting a bold new way of thinking about risk, in SeeingTomorrow Ron Dembo and Andrew Freeman offer a dynamic frameworkdesigned to enhance our ability to make important decisions, andconsequently change how we manage our investments. By incorporatinginvestors' individual circumstances and tolerances -as well as theunique reasoning behind their decision making-this innovativeapproach captures much more of how we actually think aboutrisk. From the basic building blocks required for forward-looking riskmanagement, Dembo and Freeman define and explore the roles andsignificance of such fundamentals as time horizons, risk measures,benchmarks, and scenarios. Once the foundation is laid, theseelements are used to construct a solid architecture for riskmanagement and risk-adjusted analysis that is not only generalenough to be able to handle a multitude of risks, but also able topresent many different measures of risk. With clear-cut explanations and intriguing real-world examples,Seeing Tomorrow leads you step by step through the authors'groundbreaking risk rules. These include: choosing an appropriatetime horizon, selecting scenarios, computing Value at Risk (VAR),assessing both the upside and downside of a potential deal,calculating Regret, and compiling a reliable Regret matrix. Bycombining Regret, Upside, and a measure of our tolerance for risk,the authors demonstrate how these components create a powerful newway of approaching decisions. They offer guidance on very specificreal life problems-such as buying a house or suing someone-as wellas on broad matters of strategy and investing. Written by two leading authorities in the field, Seeing Tomorrow isa milestone addition to risk literature that will dramaticallyalter the way you view, identify, and manage risk. It is must reading for investors and decision makers alike. "Seeing Tomorrow is a powerhouse in the understanding of risk. Withtheir ingenious blend of psychology and rigorous quantitativeanalysis, the authors have created an authoritative and innovativehandbook of risk management that is essential for bothpractitioners and theoreticians." -Peter L. Bernstein author,Against the Gods and Capital Ideas. "This excellent and readable book provides an innovative approachto choosing actions when the outcomes are uncertain. Anyone with aninterest in improving their decision-making skills would benefitfrom reading this. Anyone with a professional interest in riskmanagement must read it." -Stephen A. Ross Fischer Black VisitingProfessor of Finance Massachusetts Institute of Technology SloanSchool of Management Sterling Professor of Economics and Finance,Yale University. "Ron Dembo and Andrew Freeman have done an excellent job ofdescribing how to think about and measure risk. This will becomerequired reading for businesses and personal investmentexecutives." -Ned C. Lautenbach.

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