jaron@btinternet.comCore ConceptMaximise factors you can control. Minimise factors you can't (e.g. are random or chaotic)DiversificationInsuranceDiversificationPrinciple of variance optimisation ("all eggs not in one basket") Make investments in areas so as to minimise co-variances Challenge is accurately determining variances a prioriInsurancePrinciple of paying a small premium to compensate future losses should the worst happen. Kenneth Arrow theory: making everything insurable would facilitate risk-takingFuturesFuturesbased on Black-Scholes theory Counterparts with opposite requirements can reduce each others' risk Originally intended as a means to cover risk, can make money - but very risky!falsebusiness12002-06-18T00:35:00.251+01:002002-06-19T00:00:14.130+01:00risk