TY - JOUR
T1 - Optimal premium pricing for a heterogeneous portfolio of insurance risks
AU - Pantelous, Athanasios A.
AU - Frangos, Nicholas E.
AU - Zimbidis, Alexandros A.
PY - 2009
Y1 - 2009
N2 - The paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of a Brownian motion. This dynamic approach is also transferred to the design of the premium process. The premium is not constant but equals the drift of the Brownian motion plus a controlled percentage of the respective volatility. The optimal controller for the premium is obtained using advanced optimization techniques, and it is finally shown that the respective pricing strategy follows a more balanced development compared with the traditional premium approaches.
AB - The paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of a Brownian motion. This dynamic approach is also transferred to the design of the premium process. The premium is not constant but equals the drift of the Brownian motion plus a controlled percentage of the respective volatility. The optimal controller for the premium is obtained using advanced optimization techniques, and it is finally shown that the respective pricing strategy follows a more balanced development compared with the traditional premium approaches.
UR - http://www.scopus.com/inward/record.url?scp=84859174204&partnerID=8YFLogxK
U2 - 10.1155/2009/451856
DO - 10.1155/2009/451856
M3 - Article
AN - SCOPUS:84859174204
SN - 1687-952X
JO - Journal of Probability and Statistics
JF - Journal of Probability and Statistics
M1 - 451856
ER -