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Quadratic Programming in Insurance

Published online by Cambridge University Press:  29 August 2014

H. Schmitter  and
E. Straub
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Abstract and introduction

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Quadratic programming means maximizing or minimizing a quadratic function of one or more variables subject to linear restrictions i.e. linear equations and/or inequalities.

Among the numerous insurance problems which can be formulated as quadratic programs we shall only discuss four, namely the Credibility, Retention, IBNR and the Cost Distribution problems.

Generally, there is no explicite solution to quadratic optimization problems, only statements about the existence of a solution can be made or some algorithm may be recommended in order to get exact or approximate numerical solutions. Restricting ourselves to typical problems of the above mentioned type, however, enables us to give an explicit solution in terms of general formulae for quite a number of cases, such as the onedimensional credibility problem, the retention problem and—under relatively week assumptions— for the IBNR-problem.

The results given here are by no means new. The only goal of this paper is to describe a few fundamental insurance problems from a common mathematical standpoint, namely that of quadratic programming and at the same time, to draw attention to a few special aspects and open questions in this field.

Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 7 , Issue 3 , March 1974 , pp. 311 - 322
Copyright
Copyright © International Actuarial Association 1974

References

[1]Bühlmann, H., Mathematical Methods in Risk Theory, Springer Verlag, 1970.Google Scholar
[2]Bühlmann, H. und Straub, E., Glaubwürdigkeit für Schadensätze, Mitteilungen der Vereinigung Schweizerischer Versicherungsmathematiker, 1970.Google Scholar
[3]Straub, E., On the Calculation of IBNR-Reserves, IBNR—The Price Winning Papers in the Boleslaw Monic Fund Competition 1971, Nederlandse Reassurantie Groep N.V. Amsrerdam 1972.Google Scholar
[4]Barlow, R., Bartholomew, D., Bremner, G. and Brunk, D., Statistical Inference under Order Restrictions, John Wiley 1972.Google Scholar
[5]Kramreiter, H. und Straub, E., On the Calculation of IBNR-Reserves II, for publication in “Mitteilungen der Schweizerischen Versicherungsmathematiker” (autumn 1973).Google Scholar