Risk Theory II (ACTL40003)

HonoursPoints: 12.5Not available in 2025

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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

  • High level of development: written communication; problem solving; statistical reasoning; application of theory to practice; interpretation and analysis.

Last updated: 4 March 2025

Eligibility and requirements

Prerequisites

Code Name Teaching period Credit Points
ACTL40002 Risk Theory I
Semester 1 (On Campus - Parkville)
 12.5

Corequisites

None

Non-allowed subjects

None

Recommended background knowledge

Please refer to Prerequisites and Corequisites.

Inherent requirements (core participation requirements)

The University of Melbourne is committed to providing students with reasonable adjustments to assessment and participation under the Disability Standards for Education (2005), and the Assessment and Results Policy (MPF1326). Students are expected to meet the core participation requirements for their course. These can be viewed under Entry and Participation Requirements for the course outlines in the Handbook.

Further details on how to seek academic adjustments can be found on the Student Equity and Disability Support website: http://services.unimelb.edu.au/student-equity/home

Last updated: 4 March 2025

Assessment

Semester 2

DescriptionTimingPercentage

Mid-semester test

  • 50 minutes
Mid semester20%

Written assignment

  • 1000 words
Second half of the teaching period10%

End-of-semester examination

  • 2 hours
Hurdle requirement: To pass this subject students must pass the end of semester examination.		During the examination period70%

Last updated: 4 March 2025

Dates & times

Not available in 2025

Time commitment details

170 Hours

Last updated: 4 March 2025

Further information

  • Texts

    Prescribed texts

    You will be advised of prescribed texts by your lecturer.

    Recommended texts and other resources

    Information Not Available

  • Available to Study Abroad and/or Study Exchange Students

    This subject is available to students studying at the University from eligible overseas institutions on exchange and study abroad. Students are required to satisfy any listed requirements, such as pre- and co-requisites, for enrolment in the subject.

Last updated: 4 March 2025