One of the more interesting fields in applied mathematics is working as an actuary. Actuaries are principally involved in risk management; at the moment, about seventy percent of practicing actuaries in positions associated with the insurance industry. Their job is to analyze the risk of an investment and set a financial value to it. It is an active area of research and experimentation, both academically and in the marketplace. Here are a few methods:
Offsetting one risk with another. Under certain circumstances, two harmful events might possess the characteristic that when the likelihood of one goes up, the likelihood of the other goes down.
Risk is a matter of perspective. What might be harmful to one party, might be good for another. For example, when the value of the dollar goes down against the French Franc that might be bad for an American business, but favorable for a French business.
Focus on catastrophic risks. Mathematical theory shows that the greatest relief from risk comes from eliminating unlikely but enormous loss possibilities. This might involve purchasing a life insurance policy or investing the savings in many different stocks, to reduce the exposure to any one company's fortunes.
Diversification. It is better to take on many small risks than face one big risk. Many small risks generally average out, to give an outcome that is not too extreme in one direction or another.
