Risk/return relation

The risk of a security or a portfolio is, in the sense discussed above, usually measured by the volatility or synonymously by the standard deviation of its return. A graphic illustration is useful in an analysis of the risk/return relation. In Exhibit 27.1, the monthly average annualized returns (ordinate) and the corresponding volatilities abszissa) of portfolios are depicted, formed by only one security group each. 

As a point of reference for the proportions of corporate and government bonds in the portfolio, historical data are analyzed. An ex post simulation examines how the risk/return relation of a mixed portfolio would have developed in the past. The (expected) return of a mixed portfolio is made up as follows ... 

In this chapter we addressed the question of what proportions corporate and government bonds of different credit quality and maturity segments an investor should hold in a fixed-income portfolio. Maximizing the risk/ return relation according to the Markowitz approach is the core issue here. Optimal portfolio weights were established in ex post simulations. 

Selecting individual corporate bonds with a favourable risk/return relation requires a precise analysis of risks and setting comprehensible assessment rules. For this reason rating models have been developed and presented here for various industries that help to evaluate the credit quality of corporations. 

The operation is a financial system profit and attractive returns on investment occur because revenues brought in exceed payments for equipment, persormel, feedstocks and operating supplies. Processes are built and operate because the return on financial investment relative to the risk exceeds other investment opportunities of similar risk. See related topic Section 1.7. 

Risk and uncertainty associated with each venture should translate, ia theory, iato a minimum acceptable net return rate for that venture. Whereas this translation is often accompHshed implicitly by an experienced manager, any formal procedure suffers from the lack of an equation relating the NRR to risk, as well as the lack of suitable risk data. A weaker alternative is the selection of a minimum acceptable net return rate averaged for a class of proposed ventures. The needed database, from a collection of previous process ventures, consists of NPV, iavestment, venture life, inflation, process novelty, decision (acceptance or rejection), and result data. 

Figure 2.42 shows the variability risks analysis based on the toleranees assigned to meet the 0.2 mm toleranee for the assembly. Given that an FMEA Severity Rating (S) = 5 has been determined, whieh relates to a definite return to manufaeturer , both impaet extruded eomponents are in the unaeeeptable design region, as well as the bobbin and plunger end seal as shown on the Conformability Matrix in Figure 2.43. The toleranee for the brass tube base thiekness has no risk and is an aeeeptable design.

Another issue is the development and refinement of the testing protocols used in mesocosms. Mesocosms could have a more important role in environmental risk assessment if the data coming from them could be better interpreted. The use of biomarker assays to establish toxic effects and, where necessary, relate them to effects produced by chemicals in the field, might be a way forward. The issues raised in this section will be returned to in Chapter 17, after consideration of the individual examples given in Part 2. 

The emphasis of the program is to support projects that complement, rather than compete with the private sector. Some examples are projects related to high-risk and novel targets, orphan diseases, and areas in which the monetary return may not be immediately clear. 

Heikkila et al. (1996) have expanded the work of Hurme and Jarvelainen (1995) with environmental and safety aspects (Fig. 11). The alternatives are simulated to determine the material and heat balances and to estimate the physical properties. Then the alternatives are assessed in economic terms for which the internal rate of return is used. The environmental effects are estimated by equivalent amount of pollutant that takes into consideration the harmfullness of the different effluent substances. With environmental risks are also considered aspects of occupational health to choose inherently healthier process. Even though most health related rules are considered later in the work instructions, health effects should also be a part of the decision procedure. The inherent safety is estimated in terms of the inherent safety index as described later. 

A high plasma concentration of LDL (usually measured as LDL-cholesterol) is a risk factor for the development of atheroma whereas a high concentration of HDL is an anti-risk factor for cardiovascular disease (CVD). Fundamental discoveries relating to cholesterol metabolism and the importance of the LDL receptor made by Nobel laureates Joseph Goldstein and Michael Brown led to an understanding of the role of LDL in atherosclerosis. The impact of HDL in reducing CVD risk is often explained by the removal of excess cholesterol from tissues and its return to the liver, a process known as reverse cholesterol transport. However, evidence from research by Gillian Cockerill and others shows that HDL has a fundamental anti-inflammatory role to play in cardioprotection. 

Return now to a point made early in this section. Statistical associations, the existence of which cohort and case-control studies can reveal to us, are not, of themselves, evidence of causation. If found, and even if they are strong - large relative risk or odds-ratio - they do not establish that the phenomena being investigated, the phenomena that are associated (disease and some exposure or other factor) are causally related. To see most easily why this is so, it is best to examine the difficulties that need to be overcome to move from association to any conclusion about the existence of a causal link. 

The ADR tools in BioPrint assist the user in accessing and implementing the ADR data included in BioPrint. One can quickly access the ADRs listed for a selected compound, the ADRs related to a selected body system, and the ADRs statistically associated with in vitro assay data (ADR associations). The ADR associations can be searched both by assay and by ADR. When searching by assay, ADRs associated with the selected assays and IC50 values are returned along with the risk assessment. The risk information includes the number of compounds that list the ADR, and the number of compounds... 

There is emerging evidence that OSA may be a pro-inflammatory disorder with elevated circulating cytokines [60]. Abdominal visceral fat is a major reservoir of cytokines, and obesity is a leading risk factor for the presence of OSA [60], The mechanism(s) whereby pro-inflammatory cytokines are elevated in OSA is not fully elucidated, but may be related to the excessive sympathetic nervous system activation notable in OSA. Tumor necrosis factor (TNF)-a and interleukin (IL)-6 levels are elevated in OSA [61,62] and the circadian rhythm of TNF-a is disrupted in OSA [63]. IL-6 levels are higher again in OSA patients with systemic hypertension compared to normotensive apneics [60], IL-6 levels return to normal in OSA patients treated effectively with CPAP [64]. Other mediators of inflammation elevated in OSA include intercellular adhesion molecule-1 and C-reactive protein, the latter being synthesized primarily in hepatocytes in response to IL-6 [60], The presence of these and other pro-inflammatory cytokines may link to the increased prevalence of cardiovascular morbidity in OSA. 

Money, or any other negotiable type of capital, has a time value. When a business concern invests money, it expects to receive a return during the time the money is tied up in the investment. The amount of return demanded usually is related to the degree of risk that the entire investment might be lost. 

---