In the context of risk measurement, a risk metric is the concept quantified by a
risk measure. When choosing a risk metric, an agent is picking an aspect of perceived risk to investigate, such as
volatility or
probability of default.
Risk measure and risk metric
In a general sense, a measure is a procedure for quantifying something. A metric is that which is being quantified.
In other words, the method or formula to calculate a risk metric is called a risk measure.
For example, in finance, the volatility of a stock might be calculated in any one of the three following ways:
* Calculate the sample standard deviation of the stock's returns over the past 30 trading days.
* Calculate the sample standard deviation of the stock's returns over the past 100 trading days.
* Calculate the
implied volatility of the stock from some specified
call option
In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call Option (finance), option to exchange a Security (finance), security at a set price. The buyer of the call option has the righ ...
on the stock.
These are three distinct risk measures. Each could be used to measure the single risk metric volatility.
Examples
* Deaths per passenger mile (transportation)
* Probability of failure (systems reliability)
*
Volatility (finance)
* Delta (finance)
*
Value at risk (finance/actuarial)
* Probability of default (finance/actuarial)
See also
*
Risk measure
*
Coherent risk measure
*
Deviation risk measure In financial mathematics, a deviation risk measure is a function to quantify financial risk (and not necessarily downside risk) in a different method than a general risk measure. Deviation risk measures generalize the concept of standard deviation.
...
*
Spectral risk measure
*
Distortion risk measure
References
Risk analysis
Financial risk
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