Risk Measurement

Risk Measurement

Rayenda Brahmana

As Requested to make the bachelor degree’s lecture material

The fact is my PhD topic is not about risk management, it is about valuation. I have been called to make a brief about risk measurement. Fyi, I do not have any experience in teaching or lecturing. I do not know where and how to start, especially, when they gave me a very specific topic about risk measurement. At least, I remember what my teacher in high school told me, “A Loser says: It looks easy, but it is impossible. A winner says: it looks difficult, but it still possible.”. So, I just tried my best and sketched the taught that passed by in my head. Then, I made mind mapping, and I want to describe and write my mind mapping. This is the result……….

Theoretically, risk can be defined as a model about the precise of probability. It is about the possibility of suffering loss. It means Risk concept, statistically, is a model of dispersion. Dispersion, itself, can be defined as variability in a probability distribution. The measurements of dispersion are (i) Standard Deviation, (ii) Interquartile range, (iii) Range, (iv) Mean difference, (v) Median Absolute Deviation, (vi) Average absolute deviation, (vii) Covariance, etc

In finance, everything about risk is must be closely related to volatility. Before you learn what volatility is, you have to know about Normal Distribution. Because risk is defined as the possibility of suffering loss, it means there is dispersion from normal condition. Perhaps, the most important distribution which represents adequately many random processes is Normal Distribution. If the set of events disperse from the normal distribution, it can be identified as the occurrence of risk.

Dispersion model, which proxy by Standard Deviation, also can be applied in finance. To measure the risk of stock price can use volatility. The proxy of volatility is standard deviation. So, to know how much the risk of the stock that you choose is, you can just model it from the standard deviation of the stock returns. Continue reading

Is it Very Important to be Privatized?

Is it Very Important to be Privatized?

By: Rayenda K Brahmana

Around 30 state-owned enterprises (SOE or BUMN and BUMD) are ready to go public. Going public is the process of selling shares to new investor for the first time in Stock Exchange. In finance, going public means two things, fresh money and increasing value. We are not going further by discussing about IPOs related issues such as underpricing, cyclical behavior in volume and initial returns, or poor long run performance that addressed by Ritter (1991), Levi (1993), Lougharn and Ritter (1995), and Brav and Gompers (1997). We will just discuss about the study case of privatization in Indonesia

Commonly, there are three main methods of privatization which are: (a) Asset Sale Privatization (ASP), (b) Voucher Privatization (VP), and (c) Share Issue Privatization (SIP). ASP is a privatization method by doing strategic sales. Usually, ASP conducts auction or Treuhand Model. VP is a method by discounted the price largely. SIP is the common method where shares are sold on the stock market. Continue reading