Valuing scenarios with real option pricing
Risk managers could use Black-Scholes to help drive strategy, writes René Doff
Covid-19 illustrates how far short the practice of risk management has fallen.
When the pandemic struck in the first half of 2020, some nations recognised the potential severity straight away. Only a few took sufficient measures: intensive care units were in short supply almost everywhere; many hospitals ran out of protective equipment; and testing facilities were insufficient. Elements of a crisis response were present, but could be scaled up only very slowly.
How could this have happened
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