What does Risk Volatility mean? Read on to discover the definition & meaning of the term Risk Volatility - to help you better understand the language used in insurance policies.
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.
We hope the you have a better understanding of the meaning of Risk Volatility.