Probabilities and statistics for quantifying risk in finance

Question

Explain probabilities and statistics for quantifying risk in finance.

Answer 1

In finance we tend to concentrate on risk along with probabilities we calculate, we then have all the tools of probability and statistics for quantifying various aspects of such risk. In some financial models we do attempt to address the uncertain. For illustration, the uncertain volatility work of Avellaneda et al in 1995.