Finance Term Paper Example | Topics and Well Written Essays - 500 words

Finance - Term Paper Example This would be addressed as workers retire and personal investment accounts replace Social Security. The best solution to this is a substantial personal account option and not only Social Security. 2. Formulate a risk management proposal for a fictitious potential client. Using that same proposal, augment your offering to this client. Elaborate about a proposed health insurance plan, pension plan alternatives etc. If appropriate for your fictitious client, include a section regarding alternative risk transfer techniques and bond offerings. An important trend in recent years has been the increased used of derivatives. A derivative is any of your financial assets whose value is derived from the value of some other â€Å"underlying† asset. These derivatives can be used either to reduce risks or as a speculative investment also. In theory, the use of these derivatives should allow one to manage risk better. There are also premiums that can be added to lessen one’s burden of risks. This includes the inflation premium to compensate for the expected loss of purchasing power, the default risk premium just in case there will be default in the borrower and the maturity risk premium compensate for the interest rate risk. Judgment Rating is used when potential losses are difficult to quantify. In this case, statistics is not a reliable source to determine possible losses. In judgment rating, the underwriter must use his experience and intuition to individually evaluate each potential client. A good example of this includes ocean marine insurance. Class Rating is used when losses are quantifiable or statistics are reliable. Here, there is a manual rating where it is classified into brackets which makes it easy to determine pricing in insurance proposals that are offered to customers. It is the established people of parallel situations and the great number of available statistics which permits for the