Textbook Notes (363,137)
Canada (158,217)
Business (2,364)
BU353 (31)
Chapter 2

Chapter 2.docx

3 Pages
Unlock Document

Wilfrid Laurier University
Heather Graham

Chapter 2 Risk Management Decision MakingSomeone who is risk neutral cares only about expected wealth and would not require a risk premium to accept riskDue to risk aversion most people are willing to pay insurance premiums in excess of their expected losses for insurance they are willing to pay a risk premium and most require additional compensation to induce them to accept riskThe increase in wealth if a loss occurs can be viewed as the benefit of insurance and the reduction in wealth if a loss does not occur can be viewed as the cost of insuranceIndividuals demand for insurance depends on 1 the premium loading 2 a persons income and wealth 3 an individuals information about expected losses relative to the insurers information 4 the availability of other sources of indemnity and 5 the nature of the losses monetarynonmonetaryPremium LoadingAlthough riskaverse people generally desire insurance the extent to which they will purchase insurance depends on the policys premium loadingThe premium on an insurance policyexpected claim costs plus w
More Less

Related notes for BU353

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.