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Utility is inversely related to the quantity of goods previously The basic thesis that people ascribe different values to risk, and that This grew out of trying to figure the odds in a game ofĬhance, associated with the names of Cardano and Pascal. The beginning of risk measurement was the development of the theory Nevertheless, a persistent tension still remains between "those whoĪssert that the best decisions are based on quantification and numbers,ĭetermined by the patterns of the past, and those who base theirĭecisions on more subjective degrees of belief about the uncertain That he could make decisions that would determine his future. To free man from accepting his future as the will of God to believing Humans were helpless in the hands of fate. While this permitted far moreĮlaborate measurement, risk control had first to overcome the idea that Separated from uncertainty and now managed by modern statisticalīernstein's story starts with the use of Arabic numbersĭeveloped from the Hindu numbering system. Risk as exposure to loss and describes how it first was measured, then Instead he accepts the dictionary definition of Fortunately, Bernstein spares us a discussion Transaction, compliance, strategic and reputation risks, as they apply Including credit, interest rate, liquidity, price, foreign exchange, For example, the Comptroller of the Currency, in an OCCīulletin in April 1996 directed bank management to address all risks, Risk in business and investment has become a subject of unusual Provides a rare combination of scholarship, education and pleasurable Theory - written in a style that flows easily from one idea to theĪnother, generating excitement over what will come next. The invention of numbers to today's use of derivatives and chaos Now he hasĭone an equally fine job on the evolution of modern risk management from

Wall Street (reviewed in Business Economics, April 1992). Investment in his book Capital Ideas: The Improbable Origins of Modern In 1992 he wrote anĮxtraordinarily lucid story of the modern revolution in finance and