A provisioning problem with stochastic payments
AbstractWe consider the problem of determining the minimal requirement one must establish in order to meet a series of future random payments. It is shown in a very general setting that this problem can be recast as a chance constrained model and how the technique of Sample Average Approximation can be employed to find solutions. We also use comonotonic theory to analyze analytical approximations in a restricted Gaussian setting. Our numerical illustrations demonstrate that the Sample Average Approximation is a viable and efficient way to solve the stated problem generally and outperforms the analytical approximations. In passing we present a result that is related to Stein’s famous lemma (Stein, 1981) and is of interest in itself.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 221 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/eor
Risk management; Solvency; Comonotonicity; Sample Average Approximation;
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