Sensitivity analysis and tail variability for the Wang’s actuarial index

Georgios Psarrakos and Polyxeni Vliora

Insurance: Mathematics and Economics, 2021, vol. 98, issue C, 147-152

Abstract: The ranking of insurance risks with respect to their right tail is a challenging problem. In this paper, we extend the actuarial index introduced by Wang (1998) and propose its sensitivity index based on Leser’s perturbation analysis on a proportional hazards model. We use tail variability measures by conditioning the risk for values greater than the Value-at-Risk (VaR), and we study in detail how the VaR affects the actuarial and the sensitivity index. We provide characterization results for Pareto and exponential distributions, two cases where the actuarial and its sensitivity index are independent from VaR. We also obtain monotonicity results and bounds for them. The results are illustrated by numerical examples.

Keywords: Right-tail index; Tail variability measures; Proportional hazards model; Cumulative residual entropy; Mean excess function (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:98:y:2021:i:c:p:147-152

DOI: 10.1016/j.insmatheco.2021.03.003

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