Alpha and Beta Risk Finance

Question: Discusses Alpha and Beta Risk. Please explain these terms in relation to Quality Control NOT FINANCE or STOCKS. What is meant and how are these terms used? Why are they important? Answer: In quality management system there are 2 kind of risk, one is known as alpha and the other one is beta. Alpha risk is known as a risk of incorrectly deciding by the research analyst to reject the null hypothesis. If we are considering and working under a confidence level of 95% then the alpha risk in the system is known to be 5% or simply put 0.05. In such cases we can say that there are 5% chances that the outcome of the statistical output might not hold well. Alpha error is known as a type 1 error which indicates false positive. Beta risk is the risk of judgment where the decision of thinking something as detective will be determined when actually the error does not exist. If the power of the test has been determined as 90% then the beta risk is estimated to be 10%. In such cases we can say that there are 5% chances that the outcome of the statistical output might not hold well. Alpha error is known as a type 1 error which indicates false positive. Beta risk is the risk of judgment where the decision of thinking something as detective will be determined when actually the error does not exist. In such cases we can say that there are 5% chances that the outcome of the statistical output might not hold well. Alpha error is known as a type 1 error which indicates false positive. Beta risk is the risk of judgment where the decision of thinking something as detective will be determined when actually the error does not exist. In quality management system there are 2 kind of risk, one is known as alpha and the other one is beta. Alpha risk is known as a risk of incorrectly deciding by the research analyst to reject the null hypothesis. If we are considering and working under a confidence level of 95% then the alpha risk in the system is known to be 5% or simply put 0.05.