RT Journal Article
SR 00
ID 10.1016/j.insmatheco.2016.11.008
A1 Pflug, G.
A1 Timonina-Farkas, A.
A1 Hochrainer-Stigler, S.
T1 Incorporating model uncertainty into optimal insurance contract design
JF Insurance: Mathematics and Economics
YR 2017
FD 2017-03-19
VO 73
SP 68
OP 74
AB In stochastic optimization models, the optimal solution heavily depends on the selected probability model for the scenarios. However, the scenario models are typically chosen on the basis of statistical estimates and are therefore subject to model error. We demonstrate here how the model uncertainty can be incorporated into the decision making process. We use a nonparametric approach for quantifying the model uncertainty and a minimax setup to find model-robust solutions. The method is illustrated by a risk management problem involving the optimal design of an insurance contract.
PB Elsevier
SN 0167-6687
LK https://pure.iiasa.ac.at/id/eprint/14272/