{"title":"When is truncated stop loss optimal?","authors":"Erik Bølviken, Yinzhi Wang","doi":"arxiv-2408.12933","DOIUrl":null,"url":null,"abstract":"The paper examines how reinsurance can be used to strike a balance between\nexpected profit and VaR/CVaR risk. Conditions making truncated stop loss\ncontracts optimal are derived, and it is argued that those are usually\nsatisfied in practice. One of the prerequisites is that reinsurance is not too\ncheap, and an argument resembling arbitrage suggests that it is not.","PeriodicalId":501172,"journal":{"name":"arXiv - STAT - Applications","volume":"38 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv - STAT - Applications","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/arxiv-2408.12933","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
The paper examines how reinsurance can be used to strike a balance between
expected profit and VaR/CVaR risk. Conditions making truncated stop loss
contracts optimal are derived, and it is argued that those are usually
satisfied in practice. One of the prerequisites is that reinsurance is not too
cheap, and an argument resembling arbitrage suggests that it is not.