Put option Correct Ans-An option giving the holder the right to sell a set amount of the
underlying security at any time within a specified period
Price Risk Correct Ans-The potential for a change in revenue or cost because of an increase
or a decrease in the price of a product or an input
Earnings at risk Correct Ans-The maximum expected loss of earning within a specific
degree of confidence
Conditional Value at risk Correct Ans-A model to determine the likelihood of a loss given
that the loss is greater than or equal to the Value at Risk
Monte Carlo Simulation Correct Ans-A computerized statistical model that simulates the
effects of various types of uncertainty
Capital Correct Ans-The accumulated assets of a business or an owner's equity in a
business
Equity capital Correct Ans-Preferred stock, surplus, common stock, undivided profits and
capital reserves, and net unrealized holding gains (or losses) on securities that are not
available for sale
, ARM54 Test with Complete Solutions
Leverage Correct Ans-The practice of using borrowed money to invest
Generally accepted accounting principles Correct Ans-A common set of accounting
standards and procedures used in the preparation of financial statements to ensure
consistency of presentation and reported results
Statutory accounting principles Correct Ans-The accounting principles and practices that
are prescribed or permitted by an insurer's domiciliary state and that insurers must follow
Market value surplus Correct Ans-The fair value of assets minus the fair value of liabilities
Tariff Correct Ans-A tax that shields domestic producers from foreign competition
Demographics Correct Ans-The statistical characteristics of human populations
Political risk Correct Ans-Any action by a government that favors domestic over foreign
organizations or poses a threat to foreign organizations
Risk owner Correct Ans-An individual accountable for the identification, assessment,
treatment, and monitoring of risks in a specific environment
Key performance indicator Correct Ans-Financial or nonfinancial measurement that
defines how successfully an organization is progressing toward its long-term goals
, ARM54 Test with Complete Solutions
Key risk indicator Correct Ans-A tool used by an organization to measure the uncertainty of
meeting a strategic business objective
P-D-C-A Cycle Correct Ans-The P-D-C-A Cycle, also known as the Shewhart cycle and the
Deming cycle, is an expansion of an approach to process improvement. The steps include
Plan, Do, Check, and Act
Enterprise-Wide Risk Management Process Correct Ans-Address risks with both positive
and negative potential effects on an organization
Risk control Correct Ans-A conscious act or decision not to act that reduces the frequency
and/or severity of losses or makes losses more predictable
Risk financing techniques Correct Ans-Risk management techniques, such as retention or
transfer, that generate funds to finance losses that risk control techniques cannot entirely
prevent or reduce
The Delphi Technique Correct Ans-Uses the opinions of a select group of experts to identify
risks that respond to a survey or inquiry.
Facilitated Workshop Correct Ans-When risk management professionals meet with the
organization's leaders, key employees, and other stakeholders, and have a group discussion
that identifies risks in a dynamic way
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