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Risk Management
Test One Flash Cards
34
Finance
Undergraduate 4
09/23/2010

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Cards

Term
Improperly Underwritten Mortgages
Definition
What lay at the heart of the global credit crisis?
Term
Mitigate Risk
Definition
What would be the goal of a decision maker in terms of risk? (Goal of risk management.)
Term
Evaluated for appropriateness.
Definition
When employing risk metrics, you must remember that each risk model utilized must be:
Term
Measurable and Quantifiable
Definition
Measurements used in risk metrics outcomes are characterized as which of the following?
Term
Utility Theory
Definition
Economic theory where people rank order choices based on preference. A positive theory.
Term
Utility Theory Assumptions
Definition
1. Completeness
2. Monotonicity Assumption (More is better)
3. Mix-is-Better Assumption
4. Rationality
Term
Normative Theory
Definition
Dictates that people should behave in a manner prescribed by it.
Term
Risk Map
Definition
A visual tool to consider alternatives of risk management.
Term
Self-Insuring
Definition
Retaining risks within the firm.
Term
Chief Risk Officer (CRO)
Definition
Executive officer responsible for all risk elements in the organization.
Term
Brand Equity
Definition
Value created by a company with good products and reputation.
Term
Insurance
Definition
A device to transfer risk to a third party.
Term
Finite Risk Program
Definition
financial methods that can be construed as financing risk assumptions.
Term
Risk Neutral
Definition
To them, money is money. They don’t pay for insurance, nor will they gamble
Term
Risk Averse
Definition
Avoid risk.
Term
Risk Seeker
Definition
Gambler
Term
Fortuitous Risk
Definition
Accidental or unexpected risk.
Term
Exposure
Definition
Term to describe the enterprise, property, person, or activity facing a potential loss.
Term
Appetite for Risk
Definition
Those of us who make financial decisions chose certain objectives based on our _______________.
Term
Distribution
Definition
Likelihood an even will occur.
Term
Unsettling uncertainty.
Definition
Outcomes can impact any kind of plane.
Term
Utility Theory
Definition
Persons, preferences and choices we make has a basis on individual preference.
Term
Risk Map
Definition
A visual tool with which we can make decisions
Term
Three Ways To Finance Risk
Definition
Self Insure is one of these.
Term
Risk Mapping
Definition
Charts and spectrum of risk.
Term
Public Firm's Market Value
Definition
Shares Outstanding X Value of Shares
Term
Sustainability
Definition
To maintain a certain process or state of risk.
Term
Maximizing Value
Definition
Goal of a firm.
Term
Adds Value
Definition
What does Risk Management ultimately do for a firm?
Term
Enterprise Risk Management
Definition
The method, framework, and processes to managing risks by taking an integrated view and holistic view of the various uncertainties involved across the organization. It is the process whereby an organization optimizes the manner in which it controls risks.
Term
Law of Large Numbers
Definition
As a sample of observations increases in size, the relative variation about the mean declines.
Term
Risk Pooling
Definition
Bundling together of premiums.
Term
Adverse Selection
Definition
The tendency of higher risk persons or groups to seek coverage more than less risky persons or groups.
Term
Factors that would make risk suitable to carry.
Definition
cost of coverage is economic, number of exposures is small, catastrophe may occur, probability distribution may be determined, losses definite
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