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100% negative outcome = No Risk
100% positive outcome = No Risk

Therefore through "a priori" reasoning we can state;
Risk = Uncertainity of a specific outcome.

Relevant to us, and our classification of RISK, we would fall under the further clarification of speculative risk. as opposed to say pure risk.

Within speculative risk we participate within the financial markets.
The financial markets encompassing for this purpose, Stock markets, Futures markets, Options markets, Currency markets, Commodities markets, CFD's markets.

Generalising a little, the financial markets are composed of three types of analytical participants, Fundamentals, Quants, Technicals.
Each style of analysis utilizes very different methodologies in measuring opportunity

Opportunity is then via analysis quantified into a hard number that represents potential risk, and a hard number that represents potential reward.

As a point of separation the analysis is performed on very different analytical data inputs. Fundamentals measure and quantify Business risk. Technicals measure and quantify Market risk

The two sources of data provide potentially very different quantifications of Risk & Reward for the same security.

Market risk is measured by Price
Therefore the studies as expounded via Fama et al. within Efficient Market Theory are the benchmark that adequately explain Market risk.

Business risk is measured via Capitalization structure, Operational results, and Intangibles and as a consequence pays no heed to Market risk
Thus, cannot be included within EMT
This has given rise to further theories that operate in tandem with EMT, and have simply been labeled Inefficient Market Theory the irony being that if both operate as postulated, that in longer timeframes, you will achieve a true EMT

Intrestingly some common words keep cropping up that are used out of the correct context;

Probability
Refers to the mathematical concept of statistical significance
If you use "PROBABILITY" within your argument of RISK, you are really saying that you have designed a statistical model for your theory, that conforms to rigourous statistical methodology, (which uses the Law of large numbers) and that through the testing of this statistical model, you have achieved a result that possesses STATISTICAL SIGNIFICANCE to a specified CONFIDENCE LEVEL

If you have not performed this work, you are incorrect in referring to the term probability you are in point of fact referring to a completely separate paradigm.

Which is a; Deterministic model
This is a very different model for the assessment of RISK than a model utilizing a probability based model

Risk management methodologies
Again two separate concepts have seemingly intermingled;
Stoplosses, and Diversification

This nonsense appeared on pg1.
This really demonstrates the confusion, misinformation, or plain lack of cognitive analysis performed.

Lets just break it down;

Common shares cannot go below zero.
Therefore your risk is quantifiable, it is a 100% loss of your capital.

This is dependant upon the instrument that they are written against if they are written against common stock as a "PUT", then they have a limited loss as once the common (the underlying) falls to zero, the loss is 100% and the losses within the derivative are also limited.

If you have written a derivative against a derivative, that is calculated on an underlying, for example a Futures contract, derived from an underlying index (S&P500), then the loss will = 100% if and when the S&P500 index goes to zero as then the Futures contract will lose no more value, and your exposure via the written PUT against the futures contract will also = 100%

Of course there is a second factor that limits (potentially only) loss, and that is the expiry and exercise date

The Option that exposes you to theoretical unlimited risk, is the Naked Written CALL with a long in the future expiry.
This is true because, in theory we can not quantify risk in the same way.
The "Price" can go from $1 to $10, to $100, to $1000, to $100K per share and even further, therefore we can never write RISK = 100%

Yes they can.
However this is not a "guaranteed" or hard stop equivilent to the product listed by Maquarie with CFD's. Therefore, your risk is only managed at your eventual exit point. So excluding the aforementioned example, stoplosses are a risk management tool, but are not definitive of your ultimate risk.

jog on
d998

<blockquote data-quote="ducati916" data-source="post: 37788" data-attributes="member: 2975">100% negative outcome = No Risk100% positive outcome = No RiskTherefore through &quot;a priori&quot; reasoning we can state;Risk = Uncertainity of a specific outcome. Relevant to us, and our classification of RISK, we would fall under the further clarification of speculative risk. as opposed to say pure risk. Within speculative risk we participate within the financial markets.The financial markets encompassing for this purpose, Stock markets, Futures markets, Options markets, Currency markets, Commodities markets, CFD&#039;s markets.Generalising a little, the financial markets are composed of three types of analytical participants, Fundamentals, Quants, Technicals.Each style of analysis utilizes very different methodologies in measuring opportunity Opportunity is then via analysis quantified into a hard number that represents potential risk, and a hard number that represents potential reward.As a point of separation the analysis is performed on very different analytical data inputs. Fundamentals measure and quantify Business risk. Technicals measure and quantify Market risk The two sources of data provide potentially very different quantifications of Risk &amp; Reward for the same security.Market risk is measured by Price Therefore the studies as expounded via Fama et al. within Efficient Market Theory are the benchmark that adequately explain Market risk.Business risk is measured via Capitalization structure, Operational results, and Intangibles and as a consequence pays no heed to Market risk Thus, cannot be included within EMT This has given rise to further theories that operate in tandem with EMT, and have simply been labeled Inefficient Market Theory the irony being that if both operate as postulated, that in longer timeframes, you will achieve a true EMT Intrestingly some common words keep cropping up that are used out of the correct context;Probability Refers to the mathematical concept of statistical significance If you use &quot;PROBABILITY&quot; within your argument of RISK, you are really saying that you have designed a statistical model for your theory, that conforms to rigourous statistical methodology, (which uses the Law of large numbers) and that through the testing of this statistical model, you have achieved a result that possesses STATISTICAL SIGNIFICANCE to a specified CONFIDENCE LEVEL If you have not performed this work, you are incorrect in referring to the term probability you are in point of fact referring to a completely separate paradigm.Which is a; Deterministic model This is a very different model for the assessment of RISK than a model utilizing a probability based model Risk management methodologies Again two separate concepts have seemingly intermingled;Stoplosses, and Diversification This nonsense appeared on pg1.This really demonstrates the confusion, misinformation, or plain lack of cognitive analysis performed.Lets just break it down;Common shares cannot go below zero.Therefore your risk is quantifiable, it is a 100% loss of your capital.&nbsp;This is dependant upon the instrument that they are written against if they are written against common stock as a &quot;PUT&quot;, then they have a limited loss as once the common (the underlying) falls to zero, the loss is 100% and the losses within the derivative are also limited.If you have written a derivative against a derivative, that is calculated on an underlying, for example a Futures contract, derived from an underlying index (S&amp;P500), then the loss will = 100% if and when the S&amp;P500 index goes to zero as then the Futures contract will lose no more value, and your exposure via the written PUT against the futures contract will also = 100%Of course there is a second factor that limits (potentially only) loss, and that is the expiry and exercise date The Option that exposes you to theoretical unlimited risk, is the Naked Written CALL with a long in the future expiry.This is true because, in theory we can not quantify risk in the same way.The &quot;Price&quot; can go from $1 to $10, to $100, to $1000, to $100K per share and even further, therefore we can never write RISK = 100%Yes they can.However this is not a &quot;guaranteed&quot; or hard stop equivilent to the product listed by Maquarie with CFD&#039;s. Therefore, your risk is only managed at your eventual exit point. So excluding the aforementioned example, stoplosses are a risk management tool, but are not definitive of your ultimate risk.jog ond998</blockquote>

[QUOTE="ducati916, post: 37788, member: 2975"] 100% negative outcome = No Risk 100% positive outcome = No Risk Therefore through "a priori" reasoning we can state; [B]Risk = Uncertainity of a specific outcome.[/B] Relevant to us, and our classification of RISK, we would fall under the further clarification of [B]speculative risk.[/B] as opposed to say [B]pure risk.[/B] Within speculative risk we participate within the financial markets. The financial markets encompassing for this purpose, Stock markets, Futures markets, Options markets, Currency markets, Commodities markets, CFD's markets. Generalising a little, the financial markets are composed of three types of analytical participants, Fundamentals, Quants, Technicals. Each style of analysis utilizes very different methodologies in measuring [B]opportunity[/B] Opportunity is then via analysis quantified into a hard number that represents potential risk, and a hard number that represents potential reward. As a point of separation the analysis is performed on very different analytical data inputs. Fundamentals measure and quantify [B]Business risk.[/B] Technicals measure and quantify [B]Market risk[/B] The two sources of data provide potentially very different quantifications of Risk & Reward for the same security. Market risk is measured by [B]Price[/B] Therefore the studies as expounded via Fama et al. within [B]Efficient Market Theory[/B] are the benchmark that adequately explain Market risk. Business risk is measured via [B]Capitalization structure, Operational results, and Intangibles[/B] and as a consequence pays no heed to [B]Market risk[/B] Thus, cannot be included within [B]EMT[/B] This has given rise to further theories that operate in tandem with EMT, and have simply been labeled [B]Inefficient Market Theory[/B] the irony being that if both operate as postulated, that in [B]longer timeframes, you will achieve a true EMT[/B] Intrestingly some common words keep cropping up that are used out of the correct context; [B]Probability[/B] Refers to the mathematical concept of [B]statistical significance[/B] If you use "PROBABILITY" within your argument of RISK, you are really saying that you have [B]designed a statistical model for your theory, that conforms to rigourous statistical methodology, (which uses the Law of large numbers)[/B] and that through the testing of this statistical model, you have achieved a result that [B]possesses STATISTICAL SIGNIFICANCE to a specified CONFIDENCE LEVEL[/B] If you have not performed this work, you are incorrect in referring to the term [B]probability[/B] you are in point of fact referring to a completely separate paradigm. Which is a; [B]Deterministic model[/B] This is a very different model for the assessment of RISK than a model utilizing a [B]probability based model[/B] [B]Risk management methodologies[/B] Again two separate concepts have seemingly intermingled; [B]Stoplosses, and Diversification[/B] This nonsense appeared on pg1. This really demonstrates the confusion, misinformation, or plain lack of cognitive analysis performed. Lets just break it down; Common shares cannot go below zero. Therefore your risk is quantifiable, it is a 100% loss of your capital. This is dependant upon the [B]instrument that they are written against[/B] if they are written against common stock as a "PUT", then they have a [B]limited loss[/B] as once the common (the underlying) falls to zero, the loss is 100% and the losses within the derivative are also limited. If you have written a derivative against a derivative, that is calculated on an underlying, for example a [B]Futures contract, derived from an underlying index (S&P500), then the loss will = 100% if and when the S&P500 index goes to zero[/B] as then the Futures contract will lose no more value, and your exposure via the written PUT against the futures contract will also = 100% Of course there is a second factor that limits (potentially only) loss, and that is the [B]expiry and exercise date[/B] The Option that exposes you to theoretical [B]unlimited risk, is the Naked Written CALL[/B] with a long in the future expiry. This is true because, in theory we can not quantify risk in the same way. The "Price" can go from $1 to $10, to $100, to $1000, to $100K per share and even further, therefore we can never write RISK = 100% Yes they can. However this is not a "guaranteed" or hard stop equivilent to the product listed by Maquarie with CFD's. Therefore, your risk is only managed at your eventual exit point. So excluding the aforementioned example, stoplosses are a risk management tool, but are not definitive of your ultimate risk. jog on d998 [/QUOTE]

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