UIUC
FIN 230 -
Expected Losses Examples
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University of Illinois at Urbana, Champaign
Pages 2
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Expected Loss = Loss Frequency x Loss SeverityExamples of Expected LossesExpected Loss = Loss Frequency x Loss SeverityLoss Frequency is the number of losses per number of exposuresLoss Severity is the average size of a loss if one occursExamples of Expected LossesChance of getting a parking ticket = 1/10Cost of a parking ticket = $5Expected Loss = .1 x $5 = 50¢Chance of home burning = 1/1000Value of home = $100,000Expected Loss = .001 x $100,000 =
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