Chapter 25 Uses of Efficient Frontier Analysis in Strategic Risk Management Introduction Strategic risk management framework Modern portfolio theory Practical application of risk measurement for insurance Case study Intended uses Enables organization to discover risks Across organizational boundaries Continuous cycle Considers interactions of multiple risks Combines risk appetite and risk tolerance Defines exploitable risks Strategic Risk Management Framework Strategic Risk Management Modern Portfolio Theory Mathematical model – from 1950s Risk is standard deviation When portfolio is weighted combination of assets Rp - return of portfolio Ri - return of asset i Wi – weighting of asset i E(Rp)∑wi E(Ri ) Practical Application of Risk Measurement for Insurance Purpose is to optimize insurance placements and risk limits Tail value at risk of loss - TVaRL Expected value of loss, given the occurrence of an event Case Study Three basic risks Earthquake exposure to buildings Workers’ compensation insurance General liability insurance Portfolio Options Earthquake Options Workers’ Compensation Options General Liability Options Combined Portfolio Options Intended Uses Help large organizations Risk management Portfolio management Insurance and non-insurance Best fit Established ERM Running Head: TITLE OF PAPER IN CAPITAL LETTERS 1 Title of Paper in Capital Letters Submitted by Name of Student El Centro College Class, Section, Term Word Count: TITLE OF PAPER IN CAPITAL LETTERS 2 Title of Paper in Upper and Lower Case Letters Start typing your paper here. Make sure to indent each paragraph and use double spacing for the text of the paper. The correct margins and fonts are already set up for you! As you type, the References page will always make itself your last page. You don’t have to do anything for this to happen! Here is how you cite your source in-text using APA format, and remember each paragraph has to have a citation at the end showing where you located your data. Use the other links your instructor provided in the course syllabus for different sources. But they all follow the same basic format of parenthesis then author then year of publication then page numbers then parenthesis then period. Here is an example for citing one book: Just as Sherlock Holmes investigates a case, psychologists must evaluate all the available data before making a deduction, lest they jump to an erroneous conclusion on the basis of insufficient evidence (Bram & Peebles, 2014, pp. 32–33). T References Bram, W.C., and Peebles, William J. (2014). Sherlock Holmes and the truth about history. Washington, DC: American Psychological Association. FINAL RESEARCH PAPER RUBRIC Dr. Moralez 2019 The purpose of the Rubric is to provide students with clear guidelines about how your instructor will evaluate your final research paper. 1. Thesis and APA Format: ______/35 Does the final draft .