Basis risk management and randomly scaled uncertainty
This paper proposes a method for quantifying the basis risk present in index-based insurance. It applies when the inherent uncertainty is represented by a randomly scaled variable. This turns out to be a reasonable assumption in a number of practical situations. Several properties of such a variable...
| Autores: | , , , |
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| Tipo de documento: | artigo |
| Estado: | Versión aceptada para publicación |
| Data de publicação: | 2022 |
| País: | España |
| Recursos: | Universidad de Barcelona |
| Repositório: | Dipòsit Digital de la UB |
| OAI Identifier: | oai:diposit.ub.edu:2445/191965 |
| Acesso em linha: | https://hdl.handle.net/2445/191965 |
| Access Level: | Acceso aberto |
| Palavra-chave: | Risc (Assegurances) Funcions convexes Incertesa Variables aleatòries Risk (Insurance) Convex functions Uncertainty Random variables |
| Resumo: | This paper proposes a method for quantifying the basis risk present in index-based insurance. It applies when the inherent uncertainty is represented by a randomly scaled variable. This turns out to be a reasonable assumption in a number of practical situations. Several properties of such a variable are first briefly studied. Their order in the s-convex sense is discussed and the associated extreme distributions are obtained to generate the worst situations. In each scenario, the basis risk consequences are then assessed using a penalty function that takes into account the risk tolerances of the protection buyer. Basis risk limits for a fixed budget can also be set. The proposed approach is illustrated by a few simple examples. |
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