During the last five years, the world has witnessed a series of financial crisis with significant reverberations on investments and businesses. An extended period of high liquidity combined with loose regulation and political interference were the key ingredients of an unprecedented rise of financial leverage, which ultimately came to an end in 2008 through the US-subprime loan market.
If anything, those turbulent times have revealed the benefits of prudent management and highlighted the necessity of risk awareness. Although portfolio theory has long established the role of risk as the second dimension for the optimal investment selection, the late events reveal that it has been consistently underestimated in favor of the more “rewarding” dimension of return. The lagging interest could also be attributed to the difficulty to define, let alone measure and manage, what exactly risk is.