To assess and evaluate potential risks in investments, several risk analysis methods are commonly used. The following are some key methods:
Analyzing risks quantitatively involves using mathematical and statistical models. Using quantitative analysis, investors can estimate potential losses under different scenarios and estimate the probability of specific outcomes.
Analyzing risks qualitatively means evaluating them based on non-numerical factors, such as market conditions, industry trends, competitive landscape, and regulatory changes.
Analysis of historical market data and investment performance provides insight into potential risks. To identify potential risks, historical trends, correlations, and volatility patterns are studied. Investors can make informed decisions about future risks by understanding how investments have performed in the past.