Optimal Insurance Design Under a Value-at-Risk Framework
AbstractThis study designs an optimal insurance policy form endogenously, assuming the objective of the insured is to maximize expected final wealth under the Value-at-Risk (VaR) constraint. The optimal insurance policy can be replicated using three options, including a long call option with a small strike price, a short call option with a large strike price, and a short cash-or-nothing call option. Additionally, this study also calculates the optimal insurance levels for these models when we restrict the indemnity to be one of three common forms: a deductible policy, an upper-limit policy, or a policy with proportional coinsurance. Copyright Springer Science + Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal THE GENEVA RISK AND INSURANCE REVIEW.
Volume (Year): 30 (2005)
Issue (Month): 2 (December)
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Web page: http://www.springerlink.com/link.asp?id=102897
value at risk; optimal insurance; deductible; policy limit; coinsurance;
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