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Risk Volatility

Risk Volatility

Definition

A measure of the distance between an expected result and its standard deviation. The further this distance, the greater the volatility, and vice versa. For example, expected annual workers compensation losses for ABC Company are $1 million, and the standard deviation is $100,000 (i.e., 10 percent of $1 million). Expected losses for XYZ Company are also $1 million, but the standard deviation is $250,000, or 25 percent of $1 million. Therefore, XYZ Company's volatility is much higher than ABC's.

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