Tham khảo tài liệu 're academic press private real estate investment_4', tài chính - ngân hàng, đầu tư bất động sản phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | Chance Risk in General 107 hierarchy. We have purposely chosen extreme alternatives to illustrate our point. One needs a mechanism for thinking about risk in more realistic settings when the alternatives may not be so obvious. For instance how would we compare two commercial structures one occupied by a major clothing retailer and another by a major appliance retailer or two similar apartment buildings on different sides of the street Many such opportunities present themselves. They have different risk and while the difference may not be great there is a difference and one must be preferred over the other. Our goal in this chapter is to discover a way of ranking risky opportunities in a rational manner. As is so often the case rational means mathematical. THE CERTAINTY EQUIVALENT APPROACH The search for a sound way to evaluate risky alternatives leads to an inquiry into how discounts come about. We assume that nearly anything of value can be sold if the price is lowered. Risky alternatives as things of value become more appealing as the entry fee is reduced because the return increases . The idea that describes this situation well is known as the certainty equivalent CE approach. We ask an investor to choose a point of indifference between opportunities having a certain outcome and an uncertain outcome given that the price of the opportunity with the uncertain outcome is sufficiently discounted. Let us use a concrete example to illustrate the concept. Suppose someone has 100 000 and a chance to invest it that provides two and only two equiprobable outcomes one of 150 000 the good result and the other of 50 000 the unfortunate outcome . The certain alternative is to do nothing which pays 100 000. We want to know what is necessary to entice our investor away from this certain position and into an investment with an uncertain outcome. In Figure 5-6 we see the plot of utility of these uncertain outcomes as wealth rises or falls. Note the three points of interest .
