RESEARCH ARTICLES | RISK + CRYSTAL BALL + ANALYTICS

Risk versus Uncertainty

Author: Eric Torkia, MASc/Tuesday, June 1, 2010/Categories: Monte-Carlo Modeling, Analytics Articles

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Prof Frank H Knight (1921) proposed that "risk" is randomness with knowable probabilities, and "uncertainty" is randomness with unknowable probabilities. However, risk and uncertainty both share features with randomness. The illustration below explains the relationship of the concepts better than words...

Source: Knight, F H (2002/1921), Risk, Uncertainty and Profit, Washington, DC: BeardBooks.

 

 

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