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Risk Theory II (ACTL40003)
HonoursPoints: 12.5Not available in 2024
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About this subject
Overview
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Topics include premium principles, including variance principle, Esscher principle, risk adjusted principle; applications of utility theory, premium calculation and optimal reinsurance retention levels; reinsurance problems; ruin theory, Lundberg's inequality, explicit solutions for the probability of ultimate ruin, application of Panjer's recursion formula, the probability and severity of ruin, the effect of reinsurance on ruin probabilities.
Intended learning outcomes
- Apply relevant pre-requisite knowledge of mathematics, probability theory and statistics in the solution of a range of practical problems;
- Describe the basic concepts of utility theory and apply them to insurance problems;
- Explain the concepts of a premium calculation principle and show whether a premium calculation principle satisfies certain properties;
- Derive Lundberg's inequality;
- Describe the effect of simple reinsurance arrangements on ruin probabilities;
- Derive explicit solutions for the ruin probability in the classical risk model;
- Calculate approximations to ruin probabilities, explaining the rationale behind each approach.
Generic skills
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High level of development: written communication; problem solving; statistical reasoning; application of theory to practice; interpretation and analysis.
Last updated: 8 November 2024