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Luca Dellanna on Risk, Ruin, and Ergodicity

EconTalk

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Ruin and Irreversibility in Risk Management

The concept of irreversibility means that in some situations, even if the game is in your favor, one loss can ruin everything and you are out of the game./nIt's important to remember that the average return is not all that counts; what matters is whether you can continue to play./nWhen managing risks, one approach is to ask yourself how you can maximize the time you remain in the game.

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