IDEAS home Printed from https://ideas.repec.org/a/alv/journl/v2y2020i4p86-100.html
   My bibliography  Save this article

Application of Convex Optimization Results of DE FINETTI's Problem for Proportional Reinsurance (A Case Study of CAARAMA Insurance Company in Algiers)

Author

Listed:
  • Zahra Cheraitia

    (National Higher School of Statistics and Applied Economics, Tipaza (Algeria))

  • Hanya Kherchi Medjden

    (National Higher School of Statistics and Applied Economics, Tipaza (Algeria))

Abstract

The objective of this research is to find the optimal retention level for a proportional reinsurance treaty based on the results of the convex optimization developed in De Finetti's model. The latter makes it possible to determine the level of retention that achieves the expected profit by the insurer while minimizing claims volatility. The convex functions appear abundantly in economics and finance. They have remarkable specificities that allow actuaries to minimize financial risks to which some institutions are exposed, especially insurance companies. Therefore, the use of mathematical tools to manage the various risks is paramount. In order to remedy the optimization problem, we have combined the probability of failure method with the 'De Finetti' model for proportional reinsurance, which proposed a retention optimization process that minimizes claim volatility for a fixed expected profit based on the results of the non-linear optimization.

Suggested Citation

  • Zahra Cheraitia & Hanya Kherchi Medjden, 2020. "Application of Convex Optimization Results of DE FINETTI's Problem for Proportional Reinsurance (A Case Study of CAARAMA Insurance Company in Algiers)," Management & Economics Research Journal, Faculty of Economics, Commercial and Management Sciences, Ziane Achour University of Djelfa, vol. 2(4), pages 86-100, September.
    • Handle: RePEc:alv:journl:v:2:y:2020:i:4:p:86-100
    DOI: 10.48100/merj.v2i4.127
    as

    Download full text from publisher

    File URL: https://mer-j.com/merj/index.php/merj/article/view/127
    Download Restriction: no
    File URL: https://libkey.io/10.48100/merj.v2i4.127?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Convex function; Nonlinear optimization; Proportional reinsurance; Risk minimization; CAARAMA insurance company;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:alv:journl:v:2:y:2020:i:4:p:86-100. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chihab Ilimi (email available below). General contact details of provider: https://edirc.repec.org/data/fedjedz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.