Why Does a Risk Manager Typically Focus on the Upper

question 61

Multiple Choice

Why does a risk manager typically focus on the upper tail of the probability distribution?

• A) The upper tail shows the amount of coverage of the risk a firm faces.
• B) The upper tail shows the total risk pool.
• C) The upper tail shows the confidence interval of the loss distribution.
• D) The upper tail shows the sum of the estimated mean loss plus the risk charge.

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Definitions:

Weick

Karl E. Weick, an American organizational theorist known for his contributions to the understanding of organizational behavior and sensemaking.

Rules

Explicit or understood regulations or principles governing conduct within a particular activity or sphere.

Equifinality

A principle that states in complex systems, a given end state can be reached by many potential means or from different initial conditions.

Multifinality

A principle in psychology that suggests the same beginnings can lead to multiple outcomes, highlighting how varied end states can arise from the same initial condition.