Related papers: Premiums And Reserves, Adjusted By Distortions
The option is a financial derivative, which is regularly employed in reducing the risk of its underlying securities. However, investing in option is still risky. Such risk becomes much severer for speculators who utilize option as a means…
Regulatory and contractual constraints on individual exposures are standard in insurance and reinsurance markets, but a poorly designed constraint can distort the economic incentives of risk-averse agents. In the unconstrained problem, the…
Claim reserving in insurance has been studied through two primary frameworks: the macro-level approach, which estimates reserves at an aggregate level (e.g., Chain-Ladder), and the micro-level approach, which estimates reserves at the…
Experience rating in insurance uses a Bayesian credibility model to upgrade the current premiums of a contract by taking into account policyholders' attributes and their claim history. Most data-driven models used for this task are…
If individuals at the highest mortality risk are also least likely to lapse a life insurance policy, then lapse-supported premiums magnify adverse selection costs. As an example, we model 'Term to 100' contracts, and risk as revealed by…
Pricing decisions stand out as one of the most critical tasks a company faces, particularly in today's digital economy. As with other business decision-making problems, pricing unfolds in a highly competitive and uncertain environment.…
The increasing vulnerability of power systems has heightened the need for operating reserves to manage contingencies such as generator outages, line failures, and sudden load variations. Unlike energy costs, driven by consumer demand,…
This paper concerns an insurance firm's surplus process observed at renewal inspection times, with a focus on assessing the probability of the surplus level dropping below zero. For various types of inter-inspection time distributions, an…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest…
Empirical risk minimization (ERM) is typically designed to perform well on the average loss, which can result in estimators that are sensitive to outliers, generalize poorly, or treat subgroups unfairly. While many methods aim to address…
We consider the problem of fair pricing and hedging under small perturbations of the num\'eraire. We show that for replicable claims, the change of num\'eraire affects neither the fair price nor the hedging strategy. For non-replicable…
Consider two insurance companies (or two branches of the same company) that divide between them both claims and premia in some specified proportions. We model the occurrence of claims according to a renewal process. One ruin problem…
In this paper we study the joint ruin problem for two insurance companies that divide between them both claims and premia in some specified proportions (modeling two branches of the same insurance company or an insurance and re-insurance…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
Two modern trends in insurance are data-intensive underwriting and behavior-based insurance. Data-intensive underwriting means that insurers analyze more data for estimating the claim cost of a consumer and for determining the premium based…
This paper considers an insurer with two collaborating business lines that must make three critical decisions: (1) dividend payout, (2) a combination of proportional and excess-of-loss reinsurance coverage, and (3) capital injection between…
Insurers are increasingly adopting more demand-based strategies to incorporate the indirect effect of premium changes on their policyholders' willingness to stay. However, since in practice both insurers' renewal premia and customers'…
A pricing principle is introduced for non-attainable $q$-exponential bounded contingent claims in an incomplete Brownian motion market setting. The buyer evaluates the contingent claim under the ``distorted Radon-Nikodym derivative'' and…