Lect1S08

Lect1S08 - Introduction to Risk Lecture One Dissecting Risk...

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Introduction to Risk Lecture One
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Dissecting Risk 2
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Halek RMI 300 Spring 2008 3 What is Risk? Many Definitions and Connotations Two Important Meanings of Risk 1) Expected loss (Expected value of loss) riskier → greater frequency or severity of loss 2) Variability of loss riskier → more difficult to predict “The possibility of an adverse deviation from a desired outcome that is expected or hoped for.” Risk and Probability
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Halek RMI 300 Spring 2008 4 Categories of Risk Pure Risk vs. Speculative Risk Subjective Risk vs. Objective Risk Static Risk vs. Dynamic Risk Fundamental Risk vs. Particular Risk
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Halek RMI 300 Spring 2008 5 Elements of Risk Exposure Vs. Peril Vs. Hazard (Loss) Exposure - Person or property facing risk of loss Peril - The immediate cause of loss Hazard - Condition affecting frequency or severity of loss
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Halek RMI 300 Spring 2008 6 Types of Hazards Physical Hazards - Property Conditions Intangible Hazards – Attitudes, Actions and Culture Moral Hazard – Changes in Attitude, Behavior or Actions Societal Hazards – Legal and Cultural
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Halek RMI 300 Spring 2008 7 Individual Attitudes Toward Risk Risk Neutral - Indifferent Toward Risk Value of Risky Situation is Expected Loss Risk Averse - Prefer to Avoid Risk Willing to Pay More than Expected Loss to Avoid Risk Risk Seeker - Prefer Risk Would Pay More than Expected Return to Engage in Risky Situation
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Halek RMI 300 Spring 2008 8 Sources of Risk for Individuals Personal Risks Premature Death Insufficient Income for Retirement Poor Health Unemployment
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Halek RMI 300 Spring 2008 9 Sources of Risk for Individuals Property Risks Real Property Personal Property Direct Loss Indirect Loss/Consequential Loss
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Halek RMI 300 Spring 2008 10 Sources of Risk for Individuals Liability Risks Personal Liability Premises Liability Auto Liability Environmental Liability
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This note was uploaded on 05/10/2008 for the course Z z taught by Professor Z during the Spring '08 term at Wisconsin.

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Lect1S08 - Introduction to Risk Lecture One Dissecting Risk...

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