Risk

• One standard measure is risk.
• Which is riskier, a choice of 10£ or a bet that 10% of the time you'll win 100£?
• This risk measurement is built into stock portfolios.
• Why would you ever take out insurance?
• Why would someone sell insurance?
• Can you buy insurance against the pound falling against the dollar?
• Why would you want to?
• In general, if you take more risk, you increase your expected utility.