Marshall TIA

Question 1

3 Sources of Risk, modeled in Assessing Risk Margins

Answer 1

*independent risk
*internal systemic risk
*external systemic risk

Question 2

What are the subrisks of independent risk?

Answer 2

*parameter risk
*process risk

Question 3

What are the subrisks of internal systemic risk?

Answer 3

*specification error
*parameter selection error
*data error

Question 4

What are the subrisks of external systemic risk?

Answer 4

*economic & social risks
*legislative, political, & claim inflation risks
*claim management process change risk
*expense risk
*event risk
*latent claim risk
*recovery risk

Question 5

Formula for Independent CoV

Answer 5

phi^2 = Sum(phi_i * w_i)^2

Question 6

Formula for Internal Risk CoV

Answer 6

phi^2 = (phi * w) * Sum(phi * w)^T

^T = transpose

Question 7

Formula for Risk Margin

Answer 7

mu * phi * Z_a

Z_75% = 0.67

Question 8

Formula for Total Company CoV

Answer 8

phi^2 = phi^2_independent + phi^2_internal + phi^2_external

excel formula: SQRT(SUMSQ(3 components))