The Strategy of Eliminating (Or Almost Eliminating) Risks by Taking

question 184

Multiple Choice

The strategy of eliminating (or almost eliminating) risks by taking a small share in many independent events or by taking advantage of the predictability associated with large numbers of independent events is known as:

• A)floating.
• B)specializing.
• C)pooling.
• D)screening.

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Definitions:

Beta

An indicator of how much the risk of a security or a portfolio, known as systematic risk, fluctuates in relation to the overall market.

Expected Rate of Return

This refers to the anticipated gain or loss of an investment, expressed as a percentage of the investment's initial cost.

Probability

A measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Payoff Matrix

A Payoff Matrix is a table that shows the possible outcomes of different strategies in a strategic situation or game.