Combining Two Less Than Perfectly Positively Correlated Assets to Reduce

question 145

Multiple Choice

Combining two less than perfectly positively correlated assets to reduce risk is known as ________.

• A)diversification
• B)valuation
• C)securitization
• D)risk aversion

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Definitions:

Insurable Interest

Insurable Interest is a principle requiring that a person purchasing insurance has a stake in the safety and protection of the insured object or individual against loss or damage.

Fraud

Fraud refers to wrongful or criminal deception intended to result in financial or personal gain.

Good Faith

Acting with honesty and sincerity without intention to deceive or defraud in a legal or transactional context.

Subrogation

The process by which an insurance company, having paid a loss to its insured, acquires the legal right to pursue any claims the insured may have against a third party responsible for the loss.