Risk
Risk is the probability of suffering emotional, physical or financial harm in the future.
There are two types of risk
- speculative
- chance of loss or gain
- e.g., stock market, gambling
- chance of loss or gain
- pure (nonspeculative)
- chance of loss only
- e.g., no financial gain from injury even with insurance
- chance of loss only
There are techniques for analyzing risk.
Insurance reduces uncertainty about nonspeculative financial losses using risk management techniques.
Pure Risk
Here are several types
- property risk: loss or damage
- liability risk: personal injury or damage to property
- failure of others to you
- e.g., your car breaks down because the mechanic didn't fix it properly —> cost of towing and inconvenience (e.g., late for meeting)
- personal risk
- mortality: die before life expectancy
- longevity: outlive savings
- disability: lose income
- morbidity: lose health (e.g., medical expenses)
page revision: 9, last edited: 06 Jul 2007 03:02