15, Risk III Flashcards
1
Q
Aggregation of risk definition
A
Combined effect of all individual risks of loss, accounting for correlations and interactions between them
2
Q
How can aggregated risk be assessed
A
- Model office projections
- Stochastic and sensitivity testing
3
Q
How must risk of loss be measured
A
In terms of effect it may have on aims of company
4
Q
Aims of company
A
- Maximise profits and/or
- Maximise return on capital
5
Q
Risks can also be assessed in relation to
A
- Company’s capital and other resources
- Impact on supervisory solvency
- Cost of failing to meet any other legislative requirements
6
Q
When might company’s credit rating be downgraded?
A
- If company doesn’t appear to be controlling risk to satisfaction of investment market
7
Q
How is credit downgrade risk to company?
A
- Adverse publicity»_space; marketing difficulties
- Increased difficulty in raising capital»_space;
»_space; increasing cost and/or limiting company’s ability to pursue capital intensive projects
