Concentration Measurement (in the context of Risk Management) denotes the process of developing and applying objective measures of Concentration Risk (excessive dependence and/or sensitivity on specific risk factors). Concentration measurement has wide applicability across different disciplines. Conceptually is linked to establishing diversity.
- The most typical tool in a concentration measurement process is the use of a Concentration Index, that is, a function that converts a distribution of observed values into a single number expressing the prevalence (Concentration) of certain observations amongst the total set
- More complex tools may consider e.g., the entire distribution of values potentially also along many dimensions