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Ch. 7 Risk Analysis
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Key Concepts:
Terms in this set (16)
Theoretical probability
probability that is based on theoretical principles rather than on actual experience
Empirical probability (a posteriori probaility)
probability measure that is based on actual experience through historical data or from the observation of facts
Probability analysis
A technique for forecasting events, such as accidental and business losses, on the assumption that they are governed by an unchanging probability distribution.
Probability distribution
Presentation (table, chart, graph) of probability estimates of a particular set of circumstances and of the probability of each possible outcome
Central tendency
single outcome that is most representative of all possible outcomes included within a probability distribution
Dispersion
variation among values in a distribution
Expected value
the weighted average of all of the possible outcomes of a probability distribution or its mean
Standard deviation
measure of dispersion between the values in a distribution and the expected value (or mean) of that distribution, calculated by taking the square root of the variance
Coefficient of variation
measure of dispersion calculated by dividing a distribution's standard deviation by its mean
Normal Distribution
probability distribution that, when graphed, generates a bell-shaped curve
Trend analysis
analysis that identifies patterns in past data and then projects these patterns into the future
Regression analysis
statistical technique that is used to estimate relationships between variables
Linear regression analysis
form of regression analysis that assumes that the change in the dependent variable is constant for each unit of change in the IV
4 dimensions of loss exposure
1. loss frequency 2. loss severity 3. total dollar losses 4. timing
Decision tree analysis
A type of analysis to compare the consequences, costs, and gains of alternative decisions and to select the most effective strategy to achieve a goal.
Event tree analysis
A type of analysis to examine all possible consequences of an accidental event and the effectiveness of existing measures to prevent or control those consequences.
THIS SET IS OFTEN IN FOLDERS WITH...
Ch. 1 Introduction to Risk Management
26 terms
Ch. 2 Risk Management Standards and Frameworks
3 terms
Ch. 3 Hazard Risk
42 terms
Ch. 5 Risk Management Framework and Process
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