I frequently see references to the use of Markowitz optimisation (the efficient frontier) or the Sharpe ratio in the context of optimisation modelling in oil and gas applications. To me, these generally seem like inappropriate frameworks in practical cases.
Archives for May 2015
Probability-Impact frameworks can be a useful workshop facilitation tool, in particular to support risk identification and prioritisation processes. However, their use can be severely flawed when used as the main framework to create the basis for quantitative risk models.
I recently read Risk Savvy by Gerd Gigerenzer (Penguin Books). This was quite an enjoyable read; in particular, the notion that society is largely “risk illiterate” is an important one with which I largely agree.
My latest book Business Risk and Simulation Modelling in Practice using Excel, VBA and @RISK has now been submitted to John Wiley & Sons, and should be available from August 2015.