Lyng Jensen / Sublett Redefining Risk & Return

The Economic Red Phone Explained
1. Auflage 2017
ISBN: 978-3-319-41369-3
Verlag: Springer Nature Switzerland
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 165 Seiten

Reihe: Progress in Mathematics

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.

Autoren/Hrsg.

Lyng Jensen, Jesper

Sublett, Susanne

Inhaltsverzeichnis

1;Preface;6
2;Contents;8
3;List of Figures;10
4;List of Tables;15
5;List of Formula;16
6;1: Introduction;17
6.1; What Is the Financing Cost of Suddenly Running Out of Capital?;22
7;2: How to Read a Monte Carlo Simulation Graph;24
8;3: Introduction to the Cost of Running Out of Capital;30
8.1; A Risk Owner and a Structure;31
9;4: Risk and Uncertainty;34
9.1; The Concept of Risk;34
9.2; The Description of Risk and Uncertainty;35
9.3; Correlated Risks;38
9.4; How Do We Process Risk?;39
9.5; People, Risk, and Uncertainty;40
10;5: The Cost of Running Out of Capital;44
10.1; Experiments and the Limitations of Literature;44
10.2; The Red Phone;48
10.3; Structural Risk Cost;51
10.4; Structural Risk;52
10.5; The Loss if a Red Phone Call Is Not Answered;52
10.6; Cost Syndrome;55
10.7; Overview of Structural Risk;57
10.8; Who Are Risk Owners?;58
10.9; The Risk Owner’s Perspective on Risk;59
10.10; Hidden Cost That Hampers Growth in Society;64
11;6: Capital;67
11.1; Relations Between Risk and Return;71
11.2; Bowman’s Paradox;74
11.3; Financial Stress Testing;75
11.4; Ineffective Return on Reserves;81
11.5; Final Points Concerning Capital;83
12;7: Insurance;84
12.1; The Historical Importance of Insurance;84
12.2; Insurance as Protection Against Red Phone Situations;85
12.3; Defective Insurance;90
12.4; The Anti-Social Risk Cost That Can Be Removed as It Occurs;94
12.5; Health Insurance;96
12.6; Tax-Paid Insurance;100
12.7; Moral Hazard;101
12.8; Final Observations Regarding Insurance;107
13;8: The Different Costs of Risk;108
14;9: Stock Taking;111
15;10: Macroeconomics;118
15.1; Equilibrium;118
15.2; The Formula for Society’s Structural Risk Cost;120
15.3; Factors in the Formula for Society’s Structural Risk Cost;122
15.3.1; Natural Disasters;123
15.3.2; Illness;123
15.3.3; Crime;124
15.3.4; The Police and the Judicial System;124
15.3.5; Corruption;125
15.3.6; Dental Care;125
15.3.7; Accidents and Injuries;126
15.3.8; Crises and Macroeconomics;126
15.3.9; Conditions on the Labour Market;127
15.3.10; The Financial Factors Included in the Formula of Society’s Structural Risk Cost;128
15.4; Perspectives on the Use of the Formula for Society’s Structural Risk Cost;129
15.5; Keynes’ Savings Paradox;129
15.6; Tax Relief;130
15.7; Equality;131
15.8; Displacement of Equilibrium;135
16;11: Self-Chosen Risk and Government Intervention;137
16.1; The Future and Structural Risk Cost;141
17;12: The Top Ten Most Important Realisations Regarding Structural Risk;145
17.1; The Cost of Risk Is Different, Depending on Who Owns It;145
17.2; Reserve Capital Generates a Higher Return than Savings;146
17.3; Bowman’s Paradox Is Not a Paradox;146
17.4; Insurance Can Improve the Return on an Investment;147
17.5; The Structural Risk Cost Is Destructive and Harmful to Society;147
17.6; The Structural Risk Cost Can Be Removed After the Risk Event Has Occurred;148
17.7; Keynes’ Savings Paradox Is Not a Paradox;148
17.8; A Purely Market-Driven Insurance System Is Not Necessarily Ideal;149
17.9; The State Can Increase Societal Growth by Removing Risks for Risk Owners;149
17.10; Long-Term Growth Is Not Just a Matter of Stimulating Consumption;150
18;13: The Cost of Structural Risk Management in Liberalism;151
19;14: How Is This Book to Be Understood and What Kind of Society Does It Wish to Create?;157
20;Bibliography;161
21;Index;164