Description: The paper o ers a simple framework for ranking the common reinsurance struc- tures in practice with the theory of stochastic orders. The basic idea is to slice the space of reinsurance structures into groups by expected loss cost to facilitate the comparisons within the group and between groups. Given the standard risk aversion assumption in economics, a spectrum of reinsurance structures with the same expected loss cost can be compared analytically with one another and sequenced based on their risk coverages under the convex order. The paper then expands the dimension of the comparison to groups of reinsurance structures with di erent expected loss costs, which can be ranked under the increasing convex order and the usual stochastic order. As such, the paper maps out the ordering for the entire space of reinsurance structures and presents it in a ma- trix format for quick reference. The implication of this stochastic ordering to reinsurance pricing is also investigated.

Description: In this paper, we introduce a political risk variable, d, to measure risk of foreign direct investment FDI. The political risk variable has opposite effects of loss reduction and loss prevention in Ehrlich and Becker 1972. The unique characteristics of political risk insurance make the applications of actuarially-based pricing models infeasible. In this study, by taking into account the effects of self-protection and self-insurance through the variable d and by maximizing utility function, we find the equilibrium for insured and insurer in a competitive market and in a monopoly one. In addition, under the equilibrium status, the boundary for the amount of investment, the insurance coverage, and the minimum required rate of return on the FDI are derived.

Description: This paper presents a random selection method with the Monte Carlo simulation technique in the estimation of loss reserves. The future loss development factors are randomly selected from a weighted empirical distribution of observed loss development factors. This nonparametric approach provides an estimate of the distribution of total loss reserve.

Description: This paper demonstrates that using a conditional probability approach to analyzing investment data yields investment forecast and stock option pricing models which more closely match actual market data, and it demonstrates the impact that conditional probabilities could have on CAPM beta and risk premia calculations. Reprinted from: Journal of Financial and Economic Practice, Vol. 6 No. 2 Spring 2006.