Stochastic Predetermination of Risk and Hedging Skills for Small Scale Entrepreneurs

Abstract

Faced with the issue of hedging risk, small businesses entrepreneurs are investing considerable resources in risk management systems in as much as to maximize profit and stay operational, as such, the types of risk are identified and quantified within each business. This paper focused on the application of stochastic processes to prove that risk could be predetermined and hence determine which kind of small business should be insured to mitigate money spent on insurance.