12.7 Risk Margin

Risk Margin

\[\begin{equation} \mu \times \phi \times Z_{\alpha} \tag{12.7} \end{equation}\]

• \(\mu\): Expected loss

• \(\phi\): CoV

• \(Z_{\alpha}\): 0.67 for 75^th percentile

\(\alpha\) %-ile

\[\begin{equation} \mu(1+\phi Z_{\alpha}) \tag{12.8} \end{equation}\]