3359273
Description
Flashcards by Hannah David, updated more than 1 year ago
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Created by Hannah David
over 8 years ago
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| Question | Answer |
| Price Risk | Uncertainty over the magnitude of cash flows due to possible changes in output and input prices - commodity price risk - exchange rate risk - interest rate risk |
| Credit Risk | Other party delay or fail to make promised payments |
| Pure Risk | - Damage to assets - Legal liability - Worker injury - Employee benefits |
| Loss Control | Reducing frequency of losses or the severity of losses (change probability) - Reduced level of risky activity - Increased precautons |
| Loss Financing | - Retention & self-insurance - Insurance - Hedging - Other contractual risk transfers |
| Retention | Obligation to pay for part or all losses |
| Internal Risk Reduction | - Diversification: selling different products or geographic locations - Investment in information: obtain superior forecasts of expected losses |
| Cost of Risk | - Expected losses - Cost of loss control - Cost of loss financing - Cost of internal risk reduction - Cost of residual uncertainly |
| Residual Uncertainty | Left over |
| Risk Averse | Choose high expected value but low variability. If EV is equal, choose lowered variability (least range of possibilities, kind of) |
| Book Value / Market Value | The purchase price minus accounting depreciation / value that the next-highest-valued user would pay for the property |
| Business Income Exposures | ...what |
| Loss Distribution | Probability distribution is for possible losses that can occur |
| Expected Loss | Expected value of the distribution |
| Standard Deviation | Square root of the variance, outcomes around expected value |
| Sample Mean | The average value from a sample of outcomes from a distribution |
| Sample standard deviation | Reflects the variation in outcomes of a particular sample from a distribution |
| Skewness | Measures the symmetry of the distribution |
| Maximum Probable Loss | Loss distribution |
| Value-at-risk | Probability distribution for a value of a portfolio or the value of a firm subject to loss |
| Correlation | Measures how random variable are related |
| Frequency | Measures the number of losses in a given period of time |
| Severity | Measures the magnitude of loss per occurrence |
| Balance Sheet | Summary of the company’s overall financial position as of a given financial statement date |
| Income Statement | - Reflects the activities of a company for a certain time period - Gives the investor a perspective on the company’s ability to operate profitably. |
| 3 Major Components of Balance Sheet | Assets Liabilities Surplus |
| 3 Major Components of Income Statement | Revenues Losses and Expenses Profit (or Loss) |
| Unearned Premium Reserves | Premiums received, but not yet earned |
| Loss Reserves | Claims Incurred (i.e. that have happened) but are not yet Paid |
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