D.07.Bault

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  1. Ruin Theory Approach for Risk Load
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    • partially correlated -> btwn std and var
    • no right or wrong when choosing std or var -> combination
  2. CAPM vs Leverage Approach
    • CAPM beta can be derived from marginal surplus
    • P/zSb is appropriate lev ratio as long as P/zS = ind lev
    • CAPM has varying ror, roe has common ror
    • CAPM & leverage methods are equivalent
  3. Reins risk load method
    reinsr subject to same mkt forces as primary -> same methods can be used
  4. Utility Approach for risk load
    • difficult to determine exact utility function
    • CAPM can be used in place of many utility functions
  5. Remaining problems in determining risk loads
    • what is ind lev ratio: should be selected by user
    • why ind lev over cpy lev: should be same across cpies
    • how to compute cov: hard so ignore and use proxy
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139580
Card Set
D.07.Bault
Description
Discussion of Risk Loads for Insurers
Updated
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