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Redefining Risk& Return The Economic Red Phone Explained

:	Jesper Lyng Jensen, Susanne Sublett
:	Redefining Risk& Return The Economic Red Phone Explained
:	Palgrave Macmillan
:	9783319413693
:	1
:	CHF 56.90
:

:	Management
:	English

:	165
:	Wasserzeichen/DRM
:	PC/MAC/eReader/Tablet
:	PDF

This book is the first attempt to re-define objective risk. It addresses the cost of running out of capital as a generalized cost syndrome and explains how it is possible to describe this cost in such a way as to give it practical, real-life significance for personal finances, company finances and the economy as a whole. The discussion begins by presenting an intuitive and useful definition of risk: the probability of prospective capital shortfall. From this point it establishes a risk theory and expands the work of major thinkers such as Frank Knight and John Maynard Keynes, and adds reserve capital as a new financial risk management tool, with an economic function that is different from savings. This book will be of interest to economists, politicians, and decision makers as well as to the general public.

Jesper Lyng Jensen is a risk professional with a broad range of experience in high risk industries such as Pharmaceutical R&D, Construction Mega Projects, and Oil& Gas Exploration and Production. Jesper also spent 6 years as consultant and independent risk researcher, which is also his current occupation.

Susanne Sublett graduated from Copenhagen Business School (CBS), Denmark, with a master's degree in Economics. Having spent many years working in France in the wine industry, rising to the position of CFO, she returned to Denmark to begin a career in the credit risk industry. Today, Susanne works as a lead financial advisor in the global finance department of a major international IT company.

	Preface	6
	Contents	8
	List of Figures	10
	List of Tables	15
	List of Formula	16
	1: Introduction	17
	What Is the Financing Cost of Suddenly Running Out of Capital?	22
	2: How to Read a Monte Carlo Simulation Graph	24
	3: Introduction to the Cost of Running Out of Capital	30
	A Risk Owner and a Structure	31
	4: Risk and Uncertainty	34
	The Concept of Risk	34
	The Description of Risk and Uncertainty	35
	Correlated Risks	38
	How Do We Process Risk?	39
	People, Risk, and Uncertainty	40
	5: The Cost of Running Out of Capital	44
	Experiments and the Limitations of Literature	44
	The Red Phone	48
	Structural Risk Cost	51
	Structural Risk	52
	The Loss if a Red Phone Call Is Not Answered	52
	Cost Syndrome	55
	Overview of Structural Risk	57
	Who Are Risk Owners?	58
	The Risk Owner’s Perspective on Risk	59
	Hidden Cost That Hampers Growth in Society	64
	6: Capital	67
	Relations Between Risk and Return	71
	Bowman’s Paradox	74
	Financial Stress Testing	75
	Ineffective Return on Reserves	81
	Final Points Concerning Capital	83
	7: Insurance	84
	The Historical Importance of Insurance	84
	Insurance as Protection Against Red Phone Situations	85
	Defective Insurance	90
	The Anti-Social Risk Cost That Can Be Removed as It Occurs	94
	Health Insurance	96
	Tax-Paid Insurance	100
	Moral Hazard	101
	Final Observations Regarding Insurance	107
	8: The Different Costs of Risk	108
	9: Stock Taking	111
	10: Macroeconomics	118
	Equilibrium	118
	The Formula for Society’s Structural Risk Cost	120
	Factors in the Formula for Society’s Structural Risk Cost	122
	Natural Disasters	123
	Illness	123
	Crime	124
	The Police and the Judicial System	124
	Corruption	125
	Dental Care	125
	Accidents and Injuries	126
	Crises and Macroeconomics	126
	Conditions on the Labour Market	127
	The Financial Factors Included in the Formula of Society’s Structural Risk Cost	128
	Perspectives on the Use of the Formula for Society’s Structural Risk Cost	129
	Keynes’ Savings Paradox	129
	Tax Relief	130
	Equality	131
	Displacement of Equilibrium	135
	11: Self-Chosen Risk and Government Intervention	137
	The Future and Structural Risk Cost	141
	12: The Top Ten Most Important Realisations Regarding Structural Risk	145
	The Cost of Risk Is Different, Depending on Who Owns It	145
	Reserve Capital Generates a Higher Return than Savings	146
	Bowman’s Paradox Is Not a Paradox	146
	Insurance Can Improve the Return on an Investment	147
	The Structural Risk Cost Is Destructive and Harmful to Society	147
	The Structural Risk Cost Can Be Removed After the Risk Event Has Occurred	148
	Keynes’ Savings Paradox Is Not a Paradox	148
	A Purely Market-Driven Insurance System Is Not Necessarily Ideal	149
	The State Can Increase Societal Growth by Removing Risks for Risk Owners	149
	Long-Term Growth Is Not Just a Matter of Stimulating Consumption	150
	13: The Cost of Structural Risk Management in Liberalism	151
	14: How Is This Book to Be Understood and What Kind of Society Does It Wish to Create?	157
	Bibliography	161
	Index	164