Risk is when you can assign the probability, but most of the time you cannot. How often do 100 year floods occur?
On Tue, Aug 9, 2011 at 3:05 PM, Sabri Oncu <[email protected]> wrote: > ken hanly wrote: > >> Why is it that when the U.S. dollar is downgraded US treasury bond yields >> decline. >> Why does not the yield go up and borrowing become more expensive when the >> risk >> increases? > > Risk? Let me give you a definition of what risk is in three steps: > > 1) Define an event; > 2) Associate a probability with which that event can occur, if you can; > 3) Then define risk as that probability of that event occurring. > > This is what risk is to my understanding. Such as, if I smoke three > packs of cigarettes per day, say, at the age of 27, my risk of dying > in the next two months is 0.001 per cent. But if I smoke three packs > of cigarettes per day, say, at the age of 67, my risk of dying in the > next two months is 10 per cent, especially if my MR shows some tumors > in my lung and all of these things. > > What is the risk of the US not paying its debt in the next, say, two > years, at the moment? > > Best, > Sabri > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Michael Perelman Economics Department California State University Chico, CA 95929 530 898 5321 fax 530 898 5901 http://michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
