DISCUSSION QUESTION
1. Discuss two methods that can be used by risk managers to forecast the average loss associated with a particular loss exposure, assuming that the firm has a large data base of prior losses.
2. Describe two types of pure risk for which the technique of risk pooling can be used to reduce risk effectively, as well as two types of pure risk in which the technique cannot be used effectively.
In your answer, briefly describe the characteristics of the pure risks that make them well (or poorly) suited for risk reduction through pooling.
