Risk Assessment and Management Flashcards
7 cards from real CAS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment and Management flashcards as text
Which risk measure is defined as the expected loss given that the loss exceeds a specified threshold?
Answer: Tail Value at Risk (TVaR)
TVaR (also called CVaR or Expected Shortfall) is the expected loss conditional on the loss exceeding the VaR threshold.
A risk with low frequency and high severity is best handled through which risk management technique?
Answer: Risk transfer via insurance
Low-frequency, high-severity risks are prime candidates for insurance transfer because catastrophic losses are rare but devastating when they occur.
In enterprise risk management (ERM), 'risk appetite' refers to:
Answer: The amount of risk an organization is willing to accept in pursuit of its objectives
Risk appetite is the level of risk an organization's board and management are willing to accept while pursuing strategic goals.
Which of the following best describes 'parameter risk' in actuarial modeling?
Answer: Uncertainty in the estimated values of model parameters
Parameter risk is the uncertainty that arises because model parameters must be estimated from finite data and may not equal their true population values.
A reinsurance treaty that pays losses exceeding $500,000 per occurrence up to $2,000,000 is called:
Answer: Per-occurrence excess of loss
Per-occurrence excess of loss (XL) reinsurance attaches at a retention level and covers losses above it up to a limit on an event-by-event basis.
Which correlation coefficient value between two risks results in the GREATEST diversification benefit in a portfolio?
Answer: -1.0
Perfect negative correlation (-1.0) means losses in one risk are exactly offset by gains in another, providing maximum diversification and the lowest combined variance.
Under the CAS ERM framework, 'risk tolerance' differs from 'risk appetite' in that risk tolerance is:
Answer: The maximum acceptable variation around risk appetite targets
Risk tolerance defines the acceptable boundaries or variation around the risk appetite, acting as operational guardrails for day-to-day decisions.