A mutual insurance diffusion stochastic control problem

Research output: Contribution to journalArticle

Abstract

This paper determines the optimal loading factor policy of a mutual insurance firm. Insurance is viewed as a collective process of N persons paying fixed (or variable, contingent) premiums and seeking protection against claims. Risk reduction for each person is then exercised through a distribution of risk by aggregating individual risks and by accumulating cash (net of operating expenses) to meet possible contingent claims. By assuming an approximate claims diffusion process, stochastic control problems for selecting the optimum loading factor policies are stated and resolved analytically. In particular, the implicit cost of bankruptcy is computed and an optimum variable-feedback loading policy is established.

Original languageEnglish (US)
Pages (from-to)241-260
Number of pages20
JournalJournal of Economic Dynamics and Control
Volume7
Issue number3
DOIs
StatePublished - 1984

Fingerprint

Stochastic Control
Insurance
Control Problem
Person
Bankruptcy
Contingent Claims
Random processes
Diffusion Process
Feedback
Costs
Policy
Stochastic control
Mutual insurance
Factor loadings

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization

Cite this

A mutual insurance diffusion stochastic control problem. / Tapiero, Charles.

In: Journal of Economic Dynamics and Control, Vol. 7, No. 3, 1984, p. 241-260.

Research output: Contribution to journalArticle

@article{604a7b252b1f4ce18dc4a47af238be3c,
title = "A mutual insurance diffusion stochastic control problem",
abstract = "This paper determines the optimal loading factor policy of a mutual insurance firm. Insurance is viewed as a collective process of N persons paying fixed (or variable, contingent) premiums and seeking protection against claims. Risk reduction for each person is then exercised through a distribution of risk by aggregating individual risks and by accumulating cash (net of operating expenses) to meet possible contingent claims. By assuming an approximate claims diffusion process, stochastic control problems for selecting the optimum loading factor policies are stated and resolved analytically. In particular, the implicit cost of bankruptcy is computed and an optimum variable-feedback loading policy is established.",
author = "Charles Tapiero",
year = "1984",
doi = "10.1016/0165-1889(84)90019-8",
language = "English (US)",
volume = "7",
pages = "241--260",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier",
number = "3",

}

TY - JOUR

T1 - A mutual insurance diffusion stochastic control problem

AU - Tapiero, Charles

PY - 1984

Y1 - 1984

N2 - This paper determines the optimal loading factor policy of a mutual insurance firm. Insurance is viewed as a collective process of N persons paying fixed (or variable, contingent) premiums and seeking protection against claims. Risk reduction for each person is then exercised through a distribution of risk by aggregating individual risks and by accumulating cash (net of operating expenses) to meet possible contingent claims. By assuming an approximate claims diffusion process, stochastic control problems for selecting the optimum loading factor policies are stated and resolved analytically. In particular, the implicit cost of bankruptcy is computed and an optimum variable-feedback loading policy is established.

AB - This paper determines the optimal loading factor policy of a mutual insurance firm. Insurance is viewed as a collective process of N persons paying fixed (or variable, contingent) premiums and seeking protection against claims. Risk reduction for each person is then exercised through a distribution of risk by aggregating individual risks and by accumulating cash (net of operating expenses) to meet possible contingent claims. By assuming an approximate claims diffusion process, stochastic control problems for selecting the optimum loading factor policies are stated and resolved analytically. In particular, the implicit cost of bankruptcy is computed and an optimum variable-feedback loading policy is established.

UR - http://www.scopus.com/inward/record.url?scp=47249094247&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=47249094247&partnerID=8YFLogxK

U2 - 10.1016/0165-1889(84)90019-8

DO - 10.1016/0165-1889(84)90019-8

M3 - Article

AN - SCOPUS:47249094247

VL - 7

SP - 241

EP - 260

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 3

ER -