Week 5.1: Pricing risk and estimating loss exposures Flashcards
1
Q
expected value/ loss
A
average/ mean
probability-weighted average
2
Q
variance (and calculating it)
A
the sum of squared
prob(price - mean) squared
3
Q
standard deviation
A
the square root of variance
4
Q
normal distribution ( figures)
A
90% : 1.645
99% : 2.33
69%: 1
5
Q
probably maximum loss
A
how much you need to put aside to avoid insolvency
regulation: minimum capital requirements
6
Q
risk pooling
A
dividing the risk among a group/ more than one person and one possible outcome
(all possible outcomes)
