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Optimal Reinsurance Revisited – A Geometric Approach

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  • Cheung, Ka Chun

Abstract

In this paper, we reexamine the two optimal reinsurance problems studied in Cai et al. (2008), in which the objectives are to find the optimal reinsurance contracts that minimize the value-at-risk (VaR) and the conditional tail expectation (CTE) of the total risk exposure under the expectation premium principle. We provide a simpler and more transparent approach to solve these problems by using intuitive geometric arguments. The usefulness of this approach is further demonstrated by solving the VaR-minimization problem when the expectation premium principle is replaced by Wang's premium principle.

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  • Cheung, Ka Chun, 2010. "Optimal Reinsurance Revisited – A Geometric Approach," ASTIN Bulletin, Cambridge University Press, vol. 40(1), pages 221-239, May.
    • Handle: RePEc:cup:astinb:v:40:y:2010:i:01:p:221-239_00
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    Cited by:

    1. Bahman Angoshtari & Virginia R. Young, 2020. "Optimal Insurance to Minimize the Probability of Ruin: Inverse Survival Function Formulation," Papers 2012.03798, arXiv.org.
    2. Cheung, K.C. & Chong, W.F. & Yam, S.C.P., 2015. "The optimal insurance under disappointment theories," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 77-90.

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