A. Briefly explain three risk exposures that an analyst should report as part of an enterprise risk management system. B. Define market risk and the economic parameters considered when calculating market risk.
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A. Briefly explain three risk exposures that an analyst should report as part of an
enterprise risk management system.
B. Define market risk and the economic parameters considered when calculating
market risk.
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- Which of the following IS NOT one of the strategies of FIRMS to manage perceptions of risk? A. Advertise. B. Offer Guarantees C. Free Trial D. Seeking Information From Respected Personal SourcesA buyer or seller must consider a number of risks when evaluating whether a long-term contract is necessary or even desirable. Three primary questions must be asked when developing a long-term contract and considering the risks: What is the potential for opportunism? In other words, how likely is the supplier to take advantage of the purchaser (or vice versa)? Is this the right supplier to engage in a long-term contract? C.Is there a fair distribution of risk and gains between the parties involved?Evaluate the relationship between risk probability, risk impact and risk exposure.
- In this simple insurance model, a company has a monopoly over a small market. There are 100K potential customers with a low risk profile, 60K potential customers with a medium risk profile, and 10K potential customers with a high risk profile. A person’s risk profile is important as it determines how much insurance is worth to the customer and how much money the customer will cost on average to the insurance company. The following table summarizes the estimates put together by the company: Low risk profile Medium risk profile High risk profile Number of potential customers 100,000 60,000 10,000 Expected expense per customer $2K $7K $15K Maximal price the customer isready to pay for insurance $3K $8K $16K Remark: Explaining where these numbers come from would require a subtler model that describes the risk covered by the insurance policy. While there is no need to do this for the purpose of this exercise, notice though how the maximal price…Define risk-seeking.You are thinking about purchasing an elegant shirt by mail. Shirts Galore offer an unlimited return policy while Over the Tops will refund 80 percent of the value of the shirt if you return it. Which of the following statements is most likely to be true? Select one: Shirts Galore's shirts are more likely to be high quality, while Over the Top's shirts are less likely to be high quality a. b. Both companies' shirts are more likely to be high quality С. Shirts Galore's shirts are less likely to be high quality, while Over the Top's shirts are more likely to be high quality d. neither company's shirts are more likely to be high quality
- How might adverse selection make it difficult for an insurance market to operate?Adverse Selection. This section on Amazon illustrates the case of adverse selection faced by Amazon. The vendors have more information about their performance than Amazon has. Explain how and why Amazon can use the customer reviews to control this problem.What are the typical types of risk faced by a firm