God created risk, in that we do not know what the future holds (Ecclesiastes 8:7). But God created us with an ability to influence future events, in particular with the ability to create new things that come to fruition in the future. Miller outlines three conceptions of risk, the third being “opportunity creation” wherein human imagination and creativity make the future indeterminate because we might—or might not— be able to bring into existence what was not there before.[1] Consistent with this, Buchanan and Vanberg (1991) argue that the markets are best understood as a creative process, as opposed to a discovery process or allocative process.[2] By God’s design the future is not deterministic, but an unfolding process impacted by human choice.

This risk has a profound impact on financial decisions.[3] Most financial instruments and the pricing of those instruments reflect this uncertainty. Loans get turned down due to uncertainty, or are priced higher to compensate for the percentage expected to fail. Stock prices rise and fall due to uncertainty. Debt contracts have reporting and collateral provisions because of uncertainty. Financial markets are greatly complicated by uncertainty, but also have a greater potential benefit to society due to the ability of risk to be managed and re-allocated via finance.