Risk Diversification Refers to the Process by Which

question 10

Multiple Choice

Risk diversification refers to the process by which:

• A)risks are shared across many different assets or people,reducing the impact of any particular risk on any one individual.
• B)people organize themselves in a group to collectively absorb the cost of the risk faced by each individual.
• C)insurance companies change the risk aversion of their clients.
• D)insurance companies reallocate the likelihood of catastrophes happening.

---

Definitions:

Variation

is a measure of the spread of data points in a dataset from the mean or another central value.

Test Statistic

A calculated value used in statistical testing to determine whether to reject the null hypothesis of a study.

Hypotheses

Statements made for testing and analysis, which can either be supported or refuted through experimentation or observation.

Standard Error Of Estimate

A measure of the accuracy of predictions made with a regression line, representing the typical distance between the observed values and the line.