Purchase Solution

Financial Decision Making: Risk

Not what you're looking for?

Ask Custom Question

Suppose your company's method of making decisions under risk is "making the best out of the worst possible outcome." What rule would you be forced to follow? Give an example and explain.

Purchase this Solution
Solution Summary

The response defines Laplace , Minimax, Savage and Hurwicz and indicates which rule is followed and why. A reference is given.

Solution Preview

This firm assumes that there is no probability distributions available or reliable enough for them so they use one of the methods that do not use probability in the decision:

• The Laplace Criterion: selection yielding the largest expected gain
• The Minimax criterion: most conservative criterion since it is based on making the best out of the worst ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Introduction to Finance

This quiz test introductory finance topics.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

View More Free Quizzes
Related BrainMass Solutions

  • Accelerated Decision Making and Risk

    340516 Accelerated Decision Making and Risk In what ways could an accelerated decision-making process harm a company? Which stage would be most in danger of being overlooked? Business decision making is often conducted under serious pressures.

  • Have "faster, better" financial information and models been

    436261 Have "faster, better" financial information and models been translated to faster strategic decision-making by Boards of Directors?

  • investment banking

    How regulatory bodies affect financial decision-making? Regulatory bodies have a major impact on the financial decision making of the organizations.

  • Decision Making

    55634 Decision making Decision making under risk is a probabilistic decision situation.

  • The Role of Financial Management in a Firm

    -Interpret the function of the Financial Balance Sheet in assisting in management's decision making process. -Discuss what could happen if management does not fulfill responsibilities related to finance.

  • Corporate culture and risk assessment in strategic planning

    For example, risk assessment would be relatively easier for an organization with clearly defined authority and responsibility and conducive environment for decision making.

  • Risks Involved with Capital Research and Valuation

    Conclusion The capital research and valuation is an important process in making investment and financial decision in an organization.

  • Discuss financing risks and weighted means of decision making

    471188 Discuss financing risks and weighted means of decision making Discuss financing risks and weighted means of decision making. Discuss financing risks and weighted means of decision making (ex.

  • Amazon.com Risk Mitigation Techniques

    Risk mitigation needs to be approved by the appropriate level of management. There are three main approaches to risk mitigation which are risk avoidance, risk management and decision making under uncertainty.

  • What are differences between accounting and finance

    Finance encompasses the decision planning that takes accounting data into consideration when making asset purchases, or making liability or equity decisions for the company.

View More Related Solutions