Risk+-&nbsp;What+are+the+different+risks+that+you+face?

=**Different types of Risk:**= Risk is the uncertainty concerning the occurrence of a loss. Risk can be classified into several distinct categories. The most important categories are the following: Pure, speculative, fundamental, and particular risk. Pure risk: When there are only the possibilities of a loss never a gain. (Example: Premature death) Speculative risk: Either profit or loss is possible. Generally, speculative risks cannot be insured. (Example: Going into business for yourself) Fundamental risk: A risk that affects the entire economy or large numbers of persons or groups within the economy. (Example: Rapid inflation) Particular risk: A risk that affects only individuals and not the entire community. (Example: Car thefts) (Source: Rejda, Principles of RMI)

Speaking in health terms, there is always a type of risk associated with a medical treatment. For example, a patient has just had a severe heart attack. The individual needs open heart surgery or else (s)he will die shortly.

=**Different Categories of Risk:**= Risk Lovers... willingness to pay... //less// -deriving less utility from a certain return than from an uncertain prospect generating the same expected return. For example, a person who buys lottery tickets even when the person knows there is only a return of 50 percent on each dollar invested. Risk Neutral//...// willingness to pay... //neutral// -deriving the same untility from a certain return as from an uncertain prospect generating the same expected return. For example, a risk neutral person will neither pay to avoid the risk nor actively take risks. Risk Aversion... willingness to pay... //more// -preparing a certain return to an uncertain prospect that generates the same expected return. If there was a chance of receiving $200 or nothing with a probability of 50%; the risk averse person would rather receive less than $100 with certainty like $80 with a probability of 100% then nothing at all.

=**Cost Effectiveness**= Cost effectiveness analysis is a method of analysis used for decision making that estimates the total costs of achieving a defined health care objective, such as a life-year saved, from a medical treatment or health behavior. The decision making regarding costs is basically a form of risk. The incremental cost effectiveness ratio (ICER) is one way to measure the cost effectiveness/risk. __Cnew-Cold__ = ICER... The lower the ICER, the lower the risk. Enew-Eold For example, if a new treatment is less costly than the old and more effective, then the new treatment is said to dominate the old and should be adopted. The risk is less if the cost is less and the benefits are greater. (Source: Santerre, Neun, Health Economics)

=**Standard Deviation**= Standard deviation is a measure of dispersion, which consequently is a measure of risk. In probability and statistics, the standard deviation of a probability distribution, random variable, or population or multiset of values is a measure of the spread of its values. It is defined as the square root of the variance. Simply put, it is a measure of how much individual elements tend to deviate from the average. In order to calculate the standard deviation, one has to arrive at an expected loss to derive the variance.

Expected loss (expected value) = Probability of loss x Amount Variance = Probability(Amount-Expected loss)^2 Standard Deviation = Square root of variance

The lower the standard deviation = less risk

(Source: [|http://en.wikipedia.org/wiki/Standard_deviation)] (Source: Santerre, Neun, Health Economics) (Source: Browning, Zupan, Microeconomics)

=**Other Sources**= To learn about //Risk Aversion//... please refer to: http://healthecon.wikispaces.com/Expected+value+-%26nbsp%3BWhat+is+risk+aversion%3F

=**Sample Questions:**=


 * Question**: What type of risk is the individual undergoing by accepting the procedure?


 * Answer**: Categorize this risk as a pure risk. This is correct because there is only a chance of a loss of life or no loss (Live).

Strategy Cost Progression-free survival days Paclitaxel $251,100 145.12 Docetaxel $250,400 172.70
 * Question**: Which treatment would be chosen and why?


 * Answer**: The Docetaxel would be chosen because the incremental cost for the Docetaxel is less and the survival days are greater.


 * Question**: What is the standard deviation? Who has the greater risk?

Prob.. .5 .3 .2
 * Joe**

Amt. 50 30 10

EV. .5x50= 25 .3x30= 9 __.2x10= 2__ 36

Var. .5(50-36)^2= 98 .3(30-36)^2= 10.8 __.2(10-36)^2= 135.2__ 244

Std. Dev.
 * 15.62**

Prob. .6 .3 .1
 * Tad**

Amt. 60 40 20

EV. .6x60= 36 .3x40= 12 __.1x220= 2__ 50

Var. .6(60-50)^2= 60 .3(40-50)^2= 30 __.1(20-50)^2= 90__ 180

Std. Dev.
 * 13.42**

Tad has less risk because 13.42 < 15.62
 * Answer**:

Fill in the blank. A risk ___'s willingness to pay is less.
 * Question**:

A. Adverse B. Neutral C. Lover D. All of the above E. None of the above

C__
 * Answer**:

What does cost effectiveness estimate?
 * Question**:

The total costs of achieving a defined health care objective.
 * Answer**:

What is the formula for the incremental cost effectiveness ratio (ICER)?
 * Question**:

Cnew-Cold__ Enew-Eold
 * Answer**:

True or False. The lower the ICER the lower the risk?
 * Question**:

True
 * Answer**: