MANAGEMENT

Detailed explanation-1: -A person with a risk-neutral approach simply doesn’t focus on the risk, regardless of whether or not that is an ill-advised thing to do. This mindset is often situational and can be dependent on price or other external factors.

Detailed explanation-2: -A person is said to be: risk averse (or risk avoiding)-if they would accept a certain payment (certainty equivalent) of less than $50 (for example, $40), rather than taking the gamble and possibly receiving nothing. risk neutral – if they are indifferent between the bet and a certain $50 payment.

Detailed explanation-3: -For example, a risk-neutral investor will be indifferent between receiving $100 for sure, or playing a lottery that gives her a 50 percent chance of winning $200 and a 50 percent chance of getting nothing. Both alternatives have the same expected value; the lottery, however, is riskier.

Detailed explanation-4: -Risk tolerance is a measure of the level of risk an organization is willing to accept, expressed in either qualitative or quantitative terms and used as a key criterion when making risk-based decisions.