Chapter 1 Flashcards
Non diversifiable Risk
Risks are correlated and affect a large segment of society. Think about risk can cause large negative effects on large group
Diversifiable Risk
Not correlated and can be managed through diversification, spread out. Will only affect small groups. Think capacity in an area for insurance
Subjective risk
May be different from the actual underlying risk. Perceived risk based on opinion
Objective risk
Measurable variation of outcomes based on facts and data
Financial risks
Come from the affect of market forces and can include market risk, think future price of a stock, liquidity risk - how quickly can it be sold without a loss
Risk management standard
A Document best practices and criteria to meet
Risk criteria
Information used to measure
Frequency
Number of losses
Severity
How bad was the loss size of the payment