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Exam (elaborations)

RMIN 4000 Ragin Test 1|Questions with Verified Answers

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RMIN 4000 Ragin Test 1|Questions with Verified Answers

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  • November 6, 2024
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  • Exam (elaborations)
  • Questions & answers
  • RMIN 4000 Ragin
  • RMIN 4000 Ragin
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Nursephil2023
RMIN 4000 Ragin Test 1|Questions with
Verified Answers
risk - -a calculated possibility of a negative outcome (loss and probability)

- possibility - -a probabilistic outcome that is known or estimated

- loss - -must be quantifiable, typically in dollar amounts

- pure risk - -risk with only two future potential states of the world (ex.
flood, time of death, cancer)

- speculative risk - -risk with three potential states of the world: loss, break
even, or gain (ex. investments, gambling)

- moral hazard - -idea that if you have insurance, you are more likely to
take larger risks and change your behavior (ex. bugatti veyron, RAND Health
Insurance Experiment - 1984)

- fundamental risk - -risk that every firm/person in a sample face at the
same time and to a similar extent (ex. inflation, unemployment, major
catastrophes)

- systemic risk - -instability in the financial system caused by
interdependency between players and the market

- particular risk - -risk that only applies to one or a small number of
people/firms at the same time (ex. fire, theft, collision)

- risk averse - -don't like risk, will pay money to offload risk

- risk seeking - -like risk, will pay money to take on risk (ex. skydiving,
poker, Google)

- frequency of loss - -how often do losses happen?

- severity of loss - -how much are losses in dollar amounts when they do
occur?

- exposure - -the asset that could be lost

- perils - -the immediate cause of the loss (action verb)

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