Chapter 1

Question 1

Non diversifiable Risk

Answer 1

Risks are correlated and affect a large segment of society. Think about risk can cause large negative effects on large group

Question 2

Diversifiable Risk

Answer 2

Not correlated and can be managed through diversification, spread out. Will only affect small groups. Think capacity in an area for insurance

Question 3

Subjective risk

Answer 3

May be different from the actual underlying risk. Perceived risk based on opinion

Question 4

Objective risk

Answer 4

Measurable variation of outcomes based on facts and data

Question 5

Financial risks

Answer 5

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

Question 6

Risk management standard

Answer 6

A Document best practices and criteria to meet

Question 7

Risk criteria

Answer 7

Information used to measure

Question 8

Frequency

Answer 8

Number of losses

Question 9

Severity

Answer 9

How bad was the loss size of the payment