Department of Finance
Journal of Actuarial Practice (1993–2006)
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Date of this Version
2006
Document Type
Article
Citation
Journal of Actuarial Practice 13 (2006), pp. 175-190
Abstract
This paper explores two tail-based premium calculation principles, the tail standard deviation (TSD) premium and the tail conditional expectation (TCE) premium, in their risk-adjusted and unadjusted forms. They are risk-adjusted using so-called distortion functions. We prove that the proportional hazard (PH) risk-adjusted TCE premium is larger than the unadjusted TCE premium. Additionally, given a risk distribution with location and scale parameters, we prove that the PH risk-adjusted TCE premium reduces to the unadjusted TSD premium.
Included in
Accounting Commons, Business Administration, Management, and Operations Commons, Corporate Finance Commons, Finance and Financial Management Commons, Insurance Commons, Management Sciences and Quantitative Methods Commons
Comments
Copyright 2006 Absalom Press