D.07.Bault

Ruin Theory Approach for Risk Load
- partially correlated -> btwn std and var
- no right or wrong when choosing std or var -> combination
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
Reins risk load method

reinsr subject to same mkt forces as primary -> same methods can be used
Utility Approach for risk load
- difficult to determine exact utility function
- CAPM can be used in place of many utility functions
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

Author

Exam9_2012

139580

Card Set

D.07.Bault

Description

Discussion of Risk Loads for Insurers

Updated

2012-05-09T21:15:16Z

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