Intro to Actuarial Science

Hannah David
Flashcards by Hannah David, updated more than 1 year ago
Hannah David
Created by Hannah David over 5 years ago
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UConn Math 2610 Key Terms

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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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