Last Updated: Jan 31, 2002
This book introduces a new set of practical principles for eliminating and reducing risk in any kind of system, financial or otherwise. The new principles thus apply to engineering systems, computer systems, and to business, financial and investment systems. They even apply to military and defense systems.
The book is simply and clearly written, with many examples to illustrate the principles. Any person with a reasonable level of professional education should be able to grasp and apply these new principles easily. However, because the book presents a whole new approach, it should also be of interest to researchers and graduate students in many disciplines, particularly those in the fields of systems, risk and finance.
Although the new principles have come from research into risk in engineering and computer systems, surprisingly, they also resolve an old dispute in the investment arena. This is the dispute between the academic theorists who use the beta measure of risk, and the followers of the ideas of the late Benjamin Graham and his famous disciple, Warren Buffett. Each side is well known for castigating the theories and ideas of the other, with seemingly little common ground.
The new risk principles, and principles for eliminating risk, show clearly that both sides in this famous dispute are right. They clearly reveal how the beta-theory proponents simply neglected to develop their theory far enough—their risk measure in particular—to include risk elimination possibilities.
At the heart of the new theory of risk in systems are two ideas. The first idea is a richer risk measure based on average system output loss with respect to the best-case system output. The second idea is exploitation of methods of eliminating output losses with respect to the best case, thus preserving the gross benefit of running the risk.
(When used with common stocks and bonds, or any system whose fluctuations in output follow a random distribution more or less, the new risk measure is equivalent to the beta risk measure commonly used in finance. However, the new measure can also be used meaningfully with a far greater variety of systems, regardless of how the output fluctuates. It is also much simpler in practice, and is conceptually much easier to grasp, than is the beta measure. In Chapter Four of the book, the relationship between the new measure and conventional standard deviation beta measure is carefully evaluated and fully explained.)
Each of the fundamental principles in the book is expressed as a mathematical equation, and explained with diverse examples, revealing a ‘unity of principle, in a diversity of system phenomena’. There are thus some elementary mathematical relationships in the book, but because their meaning is also well explained in words, and buttressed by practical examples, these can often be skipped. The intent is to enable the reader to grasp the ideas and concepts well enough to put them to practical use, in any field of endeavor—anything from spacecraft engineering, to computer systems design, to investment management.
COPYRIGHT: James Bradley 2002.
The official Publication Date is: March 01, 2001.
The publisher, Tharsis Professional Books (Tharsis Books), has arranged an Amazon.com listing for the book.
The U.S. Distributor for the book is BAKER & TAYLOR.
Commercial information is also available from BOWKER'S Books In Print .
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