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A Radical Shift in Managing Risks: Practical Applications of Complexity Theory

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  • Chichilnisky, Graciela

Abstract

Complexity theory is designed to bring order out of a rough-and- tumble world, something close to every insurance professional's or actuary's heart. Whether applied in the laboratory or as part of a mathematical model, it can do wonderful things . But in the real world it's just what its name says-a theory. It may help us understand why things go one way or another, but it can't foretell those things with such certainty that an insurance company could, say, set its rates based on the knowledge that only one hurricane will strike Florida during the coming year...

Suggested Citation

  • Chichilnisky, Graciela, 1998. "A Radical Shift in Managing Risks: Practical Applications of Complexity Theory," MPRA Paper 7881, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7881
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    File URL: https://mpra.ub.uni-muenchen.de/7881/1/MPRA_paper_7881.pdf
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    Cited by:

    1. Chichilnisky, Graciela & Heal, Geoffrey, 1998. "Managing unknown risks: the future of global reinsurance," MPRA Paper 8820, University Library of Munich, Germany.

    More about this item

    Keywords

    Complexity theory; risk; risk management; managing risk; climate change; global warming; chaotic systems; weather; hedging; hedge;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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