Stochastic Dominance: An Application to the Insurance Portfolio Decision
| Autor: | Anthony Saunders, Edmund G Sugars, Devinder K. Gandhi |
|---|---|
| Rok vydání: | 1981 |
| Předmět: |
Economics and Econometrics
Actuarial science Application portfolio management business.industry Cumulative distribution function Stochastic dominance General Business Management and Accounting Accounting Replicating portfolio Economics Probability distribution Portfolio Portfolio optimization business Finance Risk management |
| Zdroj: | The Geneva Papers on Risk and Insurance - Issues and Practice. 6:51-62 |
| ISSN: | 1468-0440 1018-5895 |
| DOI: | 10.1057/gpp.1981.22 |
| Popis: | which cash is to be invested. The number of competing decisions in each of these decision classes being large, the total number of sets of decisions tends to be very large. Each set would generate a separate insurance and investment portfolio ; a corporate portfolio. The financial outcomes for each corporate portfolio can be represented by a probability distribution or by a cumulative probability distribution of policyowners' surplus at a defined future date. Were this very large number of distributions specified (a formidable managerial problem in itself), established methods for identifying the probability of ruin for each corporate portfolio could be employed and those distributions that indicate intolerably high probabilities of ruin eliminated from further consideration.1 The manager would then have a smaller but still difficult problem ; that of deciding which remaining distribution, and thus, set of decisions, is optimal for the company. Optimum choice demands specification of optimization criteria. This paper addresses the problem of specifying appropriate criteria. It will be argued that Stochastic Dominance (SD) criteria are superior or more efficient, in many cases, than those derived from traditional models. The case in favour of SD rests on |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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