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Optimal Stop-Loss Limits under Non-Expected Utility Preferences

  • Werner Hürlimann
Conference paper

Abstract

The question of the selection of optimal retentions for insurance contracts is an old problem which has been discussed by almost all prominent actuaries, e.g. Borch, Bühlmann, DeFinetti, Straub and many others. Most of the solutions are based on expected utility preference theory. Recently the work by Denneberg(1985/1990) has shown that non-expected utility preferences may lead to desirable functional premium calculation principles. It is the purpose of this note to illustrate the impact of this approach on the retention problem. Only a specific case study is presented and no attempt to obtain more general results was made so far. We assume the reader is familiar with Denneberg(1990).

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References

  1. Boyle, P., Mao, J. (1983). An exact solution for the optimal stop-loss limit. Journal of Risk and Insurance, 719–26.Google Scholar
  2. Casti, J L. (1989). Alternate realities: mathematical models of nature and man. John Wiley and Sons, Inc.Google Scholar
  3. Denneberg, D. (1985). Valuation of fust moment risk for decision purposes in Finance and Insurance. In H. Göppel, R. Henn (ed.) 3. Tagung Geld, Banken und Versicherungen, Karlsruhe 12–15.12.1984. Verlag Versicherungswirtschaft, Karlsruhe, 855–69.Google Scholar
  4. Denneberg, D. (1990). Premium calculation: why standard deviation should be replaced by absolute deviation. ASTIN Bulletin 20, no. 2, 181–90.CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1993

Authors and Affiliations

  • Werner Hürlimann
    • 1
  1. 1.Allgemeine MathematikWinterthur-LebenWinterthurSwitzerland

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