The greater tendency of people with a more than average likelihood of loss to apply for or continue insurance, when compared with other people. An increase in antiselection often occurs in connection with increased lapse rates, which lead to increased mortality or morbidity rates. Also known as: Anti-Selection
Asset default risk occurs when an asset loses value. When an asset defaults, the company must reduce the value of the asset on its books (following accounting rules), and reduces capital and earnings. Each type of asset has a different default risk.
An option pricing model initially developed by Fischer Black and Myron Scholes for securities options and later refined by Black for options on futures. This model has been refined and it applies to a broader scope of financial assets.
A conceptual freamwork that is useful in describing the processes needed for the development and ongoing management of a financial enterprise, product or schedme. It is based on a simple problem-solving algorithm: define the problem; design the solution; and monitor the results (Source: Understanding Actuarial Management: the actuarial control cycle 2nd edition Page 3)
Corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
A credit rating agency assesses the creditworthiness of an obligor as an entity or with respect to specific securities or money market instruments. A credit rating agency may apply to the SEC for registration as a nationally recognized statistical rating organization ("NRSRO").
The risk of loss of principal or loss of a financial reward stemming from a borrower's failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. This also includes risk of failure of a reinsurer, a bank or any other counterparty to meet its contractual obligations.
Diversification is the aggregation of sets of future cash flows contingent upon actuarial risk variables that are not perfectly positively correlated. Due to the less-than-perfect correlation, the relative variability in the aggregated cash flows will be lower than the relative variabilty in the constituent sets of cash flows.