Optimal reinsurance under multiple attribute decision making
BB KARAGEYIK, DCM DICKSON
Annals of Actuarial Science | Cambridge University Press (CUP) | Published : 2016
We apply methods from multiple attribute decision making (MADM) to the problem of selecting an optimal reinsurance level. In particular, we apply the Technique for Order of Preference by Similarity to Ideal Solution method with Mahalanobis distance. We consider the classical risk model under a reinsurance arrangement – either excess of loss or proportional – and we consider scenarios that have the same finite time ruin probability. For each of these scenarios we calculate three quantities: released capital, expected profit and expected utility of resulting wealth. Using these inputs, we apply MADM to find optimal retention levels. We compare and contrast our findings with those when decision..View full abstract
Awarded by International Doctoral Research Fellowship Program-TUBITAK
The authors would like to thank the associate editor and referee whose feedback greatly improved this paper. Basak Bulut Karageyik has been supported by the 2214/A-International Doctoral Research Fellowship Program-TUBITAK during her studies at the University of Melbourne.