The Certainty Equivalent Method is a risk analysis technique in capital budgeting, where particularly risky returns are expressed in terms of the risk-free rate of return that would be their equivalent.
The measurement and analysis of the risk associated with business, financial, and investment decisions. It involves the identification of risk, the classification of risks in regard to their impact and likelihood, and a consideration of how they might best be managed.
Stress testing is a method used in risk analysis that employs simulations to estimate the impact of worst-case scenarios. It is widely used by regulators, rating agencies, and financial institutions.
