Categorize the issues of Knight
Categorize the issues of Knight.
Expert
We can categorize matters, following Knight, as given here:
1. For ‘risk’ the probabilities which given events will happen in the future are measurable and known, that is there is randomness but along with an identified probability distribution.This can be further divided.
(a) A priori risk: as the outcome of the roll of a fair die(b) Estimable risk: the probabilities can be estimated by statistical analysis of the past, for illustration, the probability of a one-day fall of 10 percent in the S and P index
2. With ‘uncertainty’ the probabilities of future events cannot be estimated or calculated.
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