Optimal multivariate quota-share reinsurance: A nonparametric mean-CVaR framework
Chengguo Weng and
Insurance: Mathematics and Economics, 2017, vol. 72, issue C, 197-214
In this paper, the Conditional Value-at-Risk (CVaR) is adopted to measure the total loss of multiple lines of insurance business and two nonparametric estimation methods are introduced to explore the optimal multivariate quota-share reinsurance under a mean-CVaR framework. While almost all the existing literature on optimal reinsurance are based on a probabilistic derivation, the present paper relies on a statistical analysis. The proposed optimal reinsurance models are directly formulated on empirical data and no explicit distributional assumption on the underlying risk vector is required. The resulting nonparametric reinsurance models are convex and computationally amenable, circumventing the difficulty of computing CVaR of the sum of a generally dependent random vector. Statistical consistency of the resulting estimators for the best CVaR is established for both nonparametric models, allowing empirical data to be generated from any stationary process satisfying strong mixing conditions. Finally, numerical experiments are presented to show that a routine bootstrap procedure can capture the distributions of the resulting risk measures well for independent data.
Keywords: Multiple optimal reinsurance; Mean-CVaR; Nonparametric model; Kernel estimation; α-mixing process; Bootstrap (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:72:y:2017:i:c:p:197-214
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