The Failure of Risk Management 寫得最好
The Frank Knight Definition
Frank Knight was an influential economist of the early 20th century who wrote a text titled Risk, Uncertainty and Profit (1921).
The book, which expanded on his 1917 doctoral dissertation, has become what many economists consider a classic.
In it, Knight makes a distinction between uncertainty and risk that still influences a large circle of academics and professionals today:
[To differentiate] the measurable uncertainty and an unmeasurable one we may use the term ‘‘risk’’ to designate the former and the term ‘‘uncertainty’’ for the latter.
可量測的不確定（uncertainty） 定義為 risk
Enriching the Lexicon 字彙定義
Risk has to include some probability of a loss—this excludes Knight’s
風險必須包含 有損失的機會 排除Knight的定義
Risk involves only losses (not gains)—this excludes PMI’s definition.
風險牽涉到 只有損失（沒有獲利） 排除 Project Management Institute的定義
Outside of finance, volatility may not necessarily entail risk—this
excludes considering volatility alone as synonymous with risk.
Risk is not just the product of probability and loss. Multiplying them
together unnecessarily presumes that the decision maker is riskneutral.
Keep risk as a vector quantity where probability and magnitude
of loss are separate until we compare it to the risk aversion of the
Risk can be made of discrete or continuous losses and associated
probabilities. We do not need to make the distinctions sometimes
made in construction engineering that risk is only discrete events.
_ Uncertainty. This includes all sorts of uncertainties, whether they are
about negative or positive outcomes. This also includes discrete values
(such as whether there will be a labor strike during the project) or
continuous values (such as what the cost of the project could be if the
project is between one and six months behind schedule). Uncertainty
can be measured (contrary to Knight’s use of the term) by the assignment
of probabilities to various outcomes.
_ Strict uncertainty. This is what many modern decision scientists would
call Knight’s version of uncertainty. Strict uncertainty is where the
possible outcomes are identified but we have no probabilities for
each. For reasons we will argue later, this should never have to be the
Strict uncertainty 嚴格的不確定性（找不到中譯）
_ Risk/reward analysis. This considers the uncertain downside as well
as the uncertain upside of the investment. By explicitly acknowledging
that this includes positive outcomes, we don’t have to
muddy the word risk by force-fitting it with positive outcomes.
Part of risk/return analysis is also the consideration of the risk aversion
of the decision maker, and we don’t have to assume the decision
maker is risk neutral (as we would when we assume that risk is
loss times probability).