the probability that an event will occur; can be same for two outcomes but may have different objective
risks - Chance of loss
characterizes the relationship between two or more variables and then uses this characterization to
predict values of a variable - regression analysis
uncertainty conce...
RMI 211 EXAM 1 - Meek
the probability that an event will occur; can be same for two outcomes but may have different objective
risks - Chance of loss
characterizes the relationship between two or more variables and then uses this characterization to
predict values of a variable - regression analysis
uncertainty concerning the occurrence of a loss - Risk
the property or life that is being considered for insurance - Insurance form of risk
any situation or circumstance in which a loss is possible, regardless of whether a loss occurs - Loss
exposure
the relative variation of actual loss from expected loss - Objective risk
uncertainty based on a person's mental condition or state of mind - Subjective (perceived) risk
refers to the long-run relative frequency of an event based on the assumptions of an infinite number of
observations and of no change in the underlying conditions - Objective probability
the individual's personal estimate of a chance of loss - Subjective probability
the cause of a loss - Peril
a condition that increases the chance of loss - Hazard
a physical condition that increases the frequency or severity of a loss - Physical hazard
, dishonesty or character defects in an individual that increases the frequency or severity of a loss -
Moral hazard
carelessness or indifference to a loss, which increases the frequency or severity of a loss -
Attitudinal hazard
refers to characteristics of the legal system or regulatory environment that increase the frequency or
severity of losses - Legal hazard
a situation in which there are only the possibilities of loss or no loss (earthquake) - Pure risk
a situation in which either profit or loss is possible (gambling) - Speculative risk
affects only individuals or small groups; can be reduced or eliminated by diversification (car theft) -
Diversifiable risk
affects the entire economy or large numbers of persons or groups within an economy; also called a
fundamental risk (hurricane) - Non-diversifiable risk
encompasses all major risks faced by a business firm, which include: pure, speculative, strategic,
operational, and financial risk - Enterprise risk
refers to the uncertainty of loss because of adverse changes in commodity prices, interest rates, foreign
exchange rates, and the value of money - Financial risk
the risk of collapse of an entire system or market due to the failure of a single entity or group of entities
that can result in the breakdown of the entire financial system - Systemic risk
risks that directly affect an individual or family; involve the possibility of a loss or reduction in income,
extra expenses or depletion of financial assets due to premature death, inadequate retirement income,
poor health, or unemployment - Personal risks
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