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ARM 54 Final Exam: Questions And Answers (Solved)
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ARM 54 Final Exam: Questions And Answers (Solved)
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ARM 54 Final Exam: Questions And Answers (Solved)Hazard Risk Right Ans - Risk from accidental loss, including the possibility
of loss or no loss
Risk Profile Right Ans - Set of characteristics common to all risks in a
portfolio
Systematic Risk Right Ans - potential for major disruption in the function of
an entire market or financial system
Cost of Risk Right Ans - total cost incurred by and organization because of
the possibility of accidental loss
Value at risk Right Ans - threshold value such that the probability of loss on
the portfolio over the given time horizon exceeds this value, assuming normal
markets and no trading in portfolio
Exposure Right Ans - any condition that presents a possibility of gain or
loss whether or not an actual loss occurs
Volatility Right Ans - Frequent fluxuations, such as price of an asset
Law of Large Numbers Right Ans - math principle stating that as the
numbers of similar but independent exposure units increases the relative
accuracy of predictions about future outcomes (losses) also increases
Time Horizon Right Ans - estimated duration
Correlation Right Ans - relationship between variables
Pure Risk Right Ans - chance of loss or no loss, no chance of gain
speculative risk Right Ans - chance of loss, no loss, or gain
credit risk Right Ans - risk that customers or other creditors will fail to
make promised payments as they are due
,subjective risk Right Ans - perceived amount of risk based on an individual
organization's opinion
objective risk Right Ans - measurable variation in uncertain outcomes
based on facts and dates
diversifiable risk Right Ans - risk that affects only some individuals,
businesses, or small groups
nondiversifiable risk Right Ans - risk that affects a large segments of
society at the same time
market risk Right Ans - uncertainty about an investment's future value
because of potential changes in the market for that type of investment
Liquidity Risk Right Ans - risk that an asset cannot be sold on short notice
without incurring a loss
Enterprise risk management Right Ans - wide approach to managing all of
an organization's key business risk and opportunities with the intent of
maximizing shareholder value
Risk Management Standard Right Ans - document published by I
recognized authority that includes principles, criteria, and best practices for
risk management
Framework Right Ans - A structure, including elements such as concepts,
methods, procedures and metrics, that supports the risk management process
Risk Management Framework Right Ans - foundation for applying the risk
management process throughout the organization
Risk Criteria Right Ans - information used as a basis for measuring the
significance of a risk
Inherent Risk Right Ans - risk to an entity apart from any action to alter
either the likelihood or impact of risk
, Residual Risk Right Ans - Risk remaining after actions to alter the risks
likelihood or impact
Risk Based Capital (RBC) Right Ans - amount of capital an insurer need to
support its operations, given the insurers risk characteristics
Modeling Right Ans - system of calculating known outcomes based on
current data and then applying these calculations to new date to predict
future outcomes
frequency Right Ans - number of losses
severity Right Ans - size of loss
avoidance Right Ans - technique that uses backups, spares, or copies of
critical property information, or capabilities and keeps them in reserve
diversification Right Ans - spreads loss exposures over a number of
projects, products, markets, or regions
insurance Right Ans - transfers the financial consequences of certain
specified loss exposures from insured to insurer
loss exposure Right Ans - any condition or situation that presents a
possibility of loss, whether or not an actual loss occurs
hazard Right Ans - condition that increases frequency or severity of a loss
moral hazard Right Ans - condition that increased the likelihood that a
person will intentionally cause or exaggerate a loss
morale hazard (attitudinal hazard) Right Ans - condition of carelessness or
indifference that increases frequency or severity of loss
physical hazard Right Ans - tangible characteristic of property, persons, or
operations that tends to increase frequency or severity of loss
legal hazard Right Ans - condition of legal environment that increases
frequency or severity of loss
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