Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks
The paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2009-01-01
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| Series: | Journal of Probability and Statistics |
| Online Access: | http://dx.doi.org/10.1155/2009/451856 |
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| _version_ | 1849304499225624576 |
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| author | Athanasios A. Pantelous Nicholas E. Frangos Alexandros A. Zimbidis |
| author_facet | Athanasios A. Pantelous Nicholas E. Frangos Alexandros A. Zimbidis |
| author_sort | Athanasios A. Pantelous |
| collection | DOAJ |
| description | The paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of a Brownian motion. This dynamic approach is also transferred to the design of the premium process. The premium is not constant but equals the drift of the Brownian motion plus a controlled percentage of the respective volatility. The optimal controller for the premium is obtained using advanced optimization techniques, and it is finally shown that the respective pricing strategy follows a more balanced development compared with the traditional premium approaches. |
| format | Article |
| id | doaj-art-1085f9a0831b4482bd41e85586b8779f |
| institution | Kabale University |
| issn | 1687-952X 1687-9538 |
| language | English |
| publishDate | 2009-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Probability and Statistics |
| spelling | doaj-art-1085f9a0831b4482bd41e85586b8779f2025-08-20T03:55:44ZengWileyJournal of Probability and Statistics1687-952X1687-95382009-01-01200910.1155/2009/451856451856Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance RisksAthanasios A. Pantelous0Nicholas E. Frangos1Alexandros A. Zimbidis2Department of Statistics, Athens University of Economics and Business, 76 Patision Street, Athens 104 34, GreeceDepartment of Statistics, Athens University of Economics and Business, 76 Patision Street, Athens 104 34, GreeceDepartment of Statistics, Athens University of Economics and Business, 76 Patision Street, Athens 104 34, GreeceThe paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of a Brownian motion. This dynamic approach is also transferred to the design of the premium process. The premium is not constant but equals the drift of the Brownian motion plus a controlled percentage of the respective volatility. The optimal controller for the premium is obtained using advanced optimization techniques, and it is finally shown that the respective pricing strategy follows a more balanced development compared with the traditional premium approaches.http://dx.doi.org/10.1155/2009/451856 |
| spellingShingle | Athanasios A. Pantelous Nicholas E. Frangos Alexandros A. Zimbidis Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks Journal of Probability and Statistics |
| title | Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks |
| title_full | Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks |
| title_fullStr | Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks |
| title_full_unstemmed | Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks |
| title_short | Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks |
| title_sort | optimal premium pricing for a heterogeneous portfolio of insurance risks |
| url | http://dx.doi.org/10.1155/2009/451856 |
| work_keys_str_mv | AT athanasiosapantelous optimalpremiumpricingforaheterogeneousportfolioofinsurancerisks AT nicholasefrangos optimalpremiumpricingforaheterogeneousportfolioofinsurancerisks AT alexandrosazimbidis optimalpremiumpricingforaheterogeneousportfolioofinsurancerisks |