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6.6.Backgroung - Risk Load
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Std dev and var-based risk loads
Use σ of loss dist and calculates risk load as a multiple
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reflects process risks but not parameter risk
Utility theory
Assume utility function that is relevant for the insr and then establish the premium so that
U(w/risk) = U(w/o risk)
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lack of guidance as to the appropriate
U(x)
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fails to distinguish btwn process and parameter risk
Probability of ruin as risk load method
Assumes ins has target, and solves for premium
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no "right" target prob or ruin
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only provides relative risk load
Author
Exam9
ID
68724
Card Set
6.6.Backgroung - Risk Load
Description
Goldfarb
Updated
2011-02-24T20:25:26Z
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