Re:risk != probability * consequence (Score 2)

coupla quickies, forgive terseness, all in good sport

it is concerned with the pricing of a derived instrument

wrong/artificial way to think of options. there is really no finance difference between derived instruments and underlying securities, only a legal diff. for instance, if I started a company and sold shares in it, they'd be real shares and people could trade options on them... but if all the company did in its operations was to purchase microsoft options, then the shares of the company would be priced and would behave like microsoft options... who's derived and who's real?

The expected value is of little use to me unless it is referenced with the risk attached to it.

i think you might be murky on risk: many people think "beta" is risk, but beta is not risk, it is correlation to the market. Gold mining stocks have very high risk, but very low beta because of little correlation to the market. But according to modern portfolio theory you should be interested in beta, not risk: non-diversifiable risk is rewarded in stock price, diversifiable risk is not.

once again, i indulge myself a little, would love to talk more but have no time...