Everyone has a risk profile: A new approach to calculating an individual’s overall risk characteristic

Abstract

A significant amount of human life is spent making decisions, and the risk involved in the decisions or outcomes is the primary determinant in going ahead with them. Academically, the discussion of risk involved in decision making is carried out at an organizational level and is limited to specific sectors like Banking, Finance, etc. Also, a significant amount of literature is fraught with discussion on financial risks. The Risk Appetite of an individual garners much attention in the academic world; however, literature supporting its quantification is astonishingly small. Additionally, the risk appetite of an individual is defined in terms of their perception of economic gains or losses. With this project, we aim to quantify the overarching risk appetite of an individual. The overall risk appetite is a function of an individual's risk attitude in various decision-making areas such as finance, health, career, etc.