COURSE SYLLABUS

Course Number: MA 195H.5 Course Title: Seminar in Risk Theory

Department : Mathematics School: Science and Engineering
Semester : Second School Year: 2018-2019
Credit : 3 units Pre-Requisites: MA 22 and MA 151
Faculty : Gerardo S. Salas Schedule: Saturday 9-12AM

A. Course Description

Risk theory is defined as the study of deviations of financial results from those expected, and
methods of avoiding inconvenient consequences from such deviations. The first part of the
course discusses two main ideas: that random events can disrupt the plans of decision makers,
and that insurance systems are developed and designed to reduce the impact and the adverse
financial effects of these events. Individual and collective risk models are introduced. Models
for both single policies, and a portfolio of policies are developed. These ideas are then
extended to collective risk models, with respect to single-period, as well as continuous-time
considerations. An overview of the applications of risk theory to insurance models will also be
discussed.

B. Learning Outcome

At the end of the course, the student should be able to:

1. (K,A) familiarize the fundamentals of insurance systems and the significance of risk
models;
2. (K,S) demonstrate mastery of the different concepts and techniques in modeling
and measuring risks, and;
3. (S,A) explore the various applications of the risk models and underlying theories to
the current actuarial industry setting.

C. Course Outline

Chapter 1. The Economics of Insurance

i. Utility Theory
ii. Insurance and Utility
iii. Elements of Insurance
iv. Optimal Insurance

Chapter 2. Individual Risk Models for a Short Term

i. Models for Individual Claim Random Variables
ii. Sums of Independent Random Variables
iii. Applications for the Distribution of the Sum
iv. Applications to Insurance

Chapter 12. Collective Risk Models for a Single Period

i. The Distribution of Aggregate Claims
 ii. Selection of Basic Distributions
iii. Properties of certain Compound Distributions
iv. Approximations to the Distribution of Aggregate Claims

Chapter 13. Collective Risk Models over an Extended Period

i. Discrete Time Model
ii. Continuous Time Model
iii. Ruin Probabilities and the Claim Amount Distribution
iv. The First Surplus below the Initial Level
v. The Maximum Aggregate Loss

Chapter 14. Applications of Risk Theory

i. Claim Amount Distributions
ii. Approximating the Individual Model
iii. Stop-Loss Reinsurance
iv. Analysis of Reinsurance Using Ruin Theory

D. Textbook

ACTUARIAL MATHEMATICS
By Newton L. Bowers, Jr., Hans U. Gerber, James C. Hickman, Donald A.
Jones and Cecil J. Nesbitt
Published by THE SOCIETY OF ACTUARIES, 1997 2nd edition.

E. References

Boyle, P.P., Options and Management of Financial Risk, Schaumburg, Ill.: Society of
Actuaries, 1992

Willett, A.H., The Economic Theory of Risk and Insurance, Phildelphia: University of
Pennsylvania Press, 1951.

Panjer, H.H., and Willmot, G.E., Insurance Risk Models., Schaumburg, Ill.: Society of
Actuaries, 1992.

Kahn, P.M., “An Introduction to Collective Risk Theory and its Application to Stop-Loss
Reinsurance,” Transactions of the Society of Actuaries, XIV: 400-425, 1962.

Dickson, David C.M., Insurance Risk and Ruin, University of Melbourne, 2005

Rob Kaas, Marc Goovaerts, Jan Dhaene, Michel Denuit, Modern Actuarial Risk Theory,
Springer Berlin Heidelberg, 2008.

Promislow, S. David, Fundamental of Actuarial Mathematics, Chichester, West Sussex:

Wiley John Wiley & Sons, Inc., 2015.

Deelstra, Griselda, Risk Theory and Reinsurance, London: Springer London, 2014.
 Silvestro, Dmitri, Modern Problems in Insurance Mathematics, Cham: Springer International
Publishing, 2014.

Kathrin Glau, Matthias Scherer, and Rudi Zagst, Innovations in Quantitative Risk
Management, Cham: Springer International Publishing, 2015.

Perna, Cira, Mathematical and Statistical Methods for Actuarial Sciences and Finance,
Cham: Springer International Publishing, 2014.

F. Grading System

Quizzes and Assignments
30%

Chapter Exams
50%
Final Exam
20%

Example:
Ave
HOMEWORK / QUIZ CHAP 1 CHAP 2 CHAP 3 Chap FINAL EXAM
LETTER
1 2 3 SUM % SCR % SCR % SCR % Exam SCR % GRADE Grade
Name ID NO. 25 30 20 75 100.0% 90 100% 90 100% 100 100% 100% 80 100% 100.0%
Japo 999999 19 13 20 52 69.3% 86 95.6% 85 94.4% 99 99.0% 96.3% 75 93.8% 87.72% B+

Letter Grades
A 92-100
B+ 86-91
B 77-85
C+ 69-76
C 60-68
D 50-59
F < 50

G. Consultation Hours

By Appointment.

Phone : 0928 5079130

Email : gerry_salas@pacificcross.com.ph