Editing Risk management (section)

===Mild versus wild risk===
[[Benoit Mandelbrot]] distinguished between "mild" and "wild" risk and argued that risk assessment and management must be fundamentally different for the two types of risk.<ref>{{Cite book|last=Mandelbrot, Benoit and Richard L. Hudson|title=The (mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward|publisher=Profile Books|year=2008|isbn=9781846682629|location=London}}</ref> Mild risk follows [[Normal distribution|normal]] or near-normal [[probability distribution]]s, is subject to [[Regression toward the mean|regression to the mean]] and the [[law of large numbers]], and is therefore relatively predictable. Wild risk follows [[fat-tailed distribution]]s, e.g., [[Pareto distribution|Pareto]] or [[power-law distributions]], is subject to regression to the tail (infinite mean or variance, rendering the law of large numbers invalid or ineffective), and is therefore difficult or impossible to predict. A common error in risk assessment and management is to underestimate the wildness of risk, assuming risk to be mild when in fact it is wild, which must be avoided if risk assessment and management are to be valid and reliable, according to Mandelbrot.