Dissertation topics in corporate finance

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Among the main differences we find that while Knight indicates that there is an ignorance which may be inherent or based on facts, it does not specify when each case can be given and under what reasons. In addition, the same author mentions that before a homogeneous data, the participants will not assign the same proportion, a situation that contrasts with the one expressed by Keynes, who indicates that if those participants are exposed to the same evidence, they will allocate the same proportion based In the evidence.

It is Keynes’s theory that we consider more appropriate, since although it agrees with Knight that there are situations in which it is not possible to assign objective probabilities to a situation of uncertainty, it takes the propositions not intrinsically related to a probability but rather a “Pair” of propositions, which makes the risk a more complete concept, since in addition to taking into account the situation, considers the factors that affect the observers and their behavior before a given uncertainty situation.

In addition to the above, and according to our opinion, Keynes’s theory prevails over that of Knight, since at the moment of no objective probabilities, Knight’s theory would have no concept of risk.

In order to give our own definition of risk, we must first explain the nature of the risk, the factors that cause it, and how it affects both financial markets and their observers and participants.

In our view the main causes of risk within a financial market can be summarized taking into account the following aspects:
· Situations of Uncertainty
· Speed ​​of change
· Burst of surprises
· Behavior, sometimes irrational, of financial markets

The above aspects form the context that we will use for the definition of risk, since they are the ones that determine the behavior and movement of the markets and their participants before an unknown situation in a determined period of time. Within a financial context, the participants choose the option they consider the most appropriate, considering that there are both internal and external factors that cannot be predicted but have a probability of occurrence, in order to obtain the highest possible profit; In other words, risk is an exposure to situations of uncertainty with different levels of impact. We can also argue that once a market option is selected, the main consequence is the volatility of the market, because before the same impulse there are no equal outcomes, in other words, market participants do not react in the same way In the face of a specific situation, a topic dealt with extensively in Behavioral Finance, which leads to the market taking a stable or very unstable trend, depending on the perceptions and attitudes of the observers.
Finally, we can express that situations of uncertainty must be analyzed in detail from their perspective of cause and effect within the context of the financial market, in order to determine a risk and thus, based on that risk and possible scenarios, make the most Suitable for the situation presented.

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