What premium will be charged based on the above formula

Assignment Help Computer Engineering

Reference no: EM133337946

Case: An e-commerce firm estimates a stock market loss of a breach to be Z =$100,000. The firm purchases a cyber insurance policy with a deductible of $50,000. The policy covers direct losses from a breach minus the deductible. The firm and the insurer estimate that there will be a Low loss L (with probability p) or a Medium loss M (with probability q) or a High loss H (with probability 1 - p -

q). Assume that the firm is not obliged by law to disclose a breach when the loss is Low, but government regulations require the firm to disclose a Medium or a High breach.

The insurer uses the following (traditional) formula to the firm to calculate the premium P (x) based on the deductible, x:

P(x) = 1.05[p(L - x)+ + q(M - x)+ + (1 - p - q)(H - x)+]

The firm and the insurer agree on the estimates L = $100,000 (with a proba- bility of 0.4), M = $200,000 (with a probability of 0.4) and H = $600,000 (with a probability of 0.2).

What premium will be charged based on the above formula?

Is this premium fair, or is it overpriced based on the firm's correct claiming strategy?

Given the firm's correct claiming strategy, what should the fair premium be?

Under the traditional contract, can you suggest a better choice for the deductible that will maintain the current claiming strategy (based on the current deductible of 50, 000)?

Reference no: EM133337946

Questions Cloud

Possible threats and vulnerabilities : Purpose of the plan, background and overview of key risk concepts and The plan to conduct an information security risk assessment of the new company

Evaluate the best practices surrounding cybersecurity : I need help creating a report that evaluates the theories, principles, and best practices surrounding cybersecurity and security awareness training programs.

How does a functional organization impact project manager : How does a Functional organization impact the project manager, project team, and project? Why is this important?

Evaluate the deployment of a user-centered system : In this project, you will demonstrate your mastery of the following competency: Evaluate the design and deployment of a user-centered system.

What premium will be charged based on the above formula : What premium will be charged based on the above formula? Is this premium fair, or is it overpriced based on the firm's correct claiming strategy?

State the time management issue and how it was resolved : Write a scenario in which the CISO is able to resolve a time constraint using fast-tracking or crashing. State the time management issue and how it was resolved

What do the wireless carriers do mitigate this threat : takes out power and cell towers for a large geographical area? What do the wireless carriers do mitigate this threat or recover from a disaster

Reflect on your own icon arrangement and preferences : MMIS 680 Nova Southeastern University Reflect on your own icon arrangement and preferences on your smartphone. Which category (see the article, page 2139)

Elements of computer software security : Topic: Provide a basic discussion outlining the critical elements of Computer Software Security.

User Account

All Pages