Determine the minimum amount of capital, Business Management

Assignment Help:

Question:

A reinsurance company writes a book of catastrophe reinsurance contracts to an expected combined ratio of 60%. It estimates that its aggregate claims distribution is compound Poisson with λ=20% and the claim size distribution is exponential with mean of $1m.

a) Determine the minimum amount of capital it needs to ensure that its ultimate probability of ruin stays below 0.5%.

b) Ignoring investment income, calculate the return on capital that the reinsurer would generate if it held the amount of capital that you calculated in (a) above.

c) Suggest potential practical limitations of the above solution.


Related Discussions:- Determine the minimum amount of capital

Culture - organizational culture, Culture - Organizational Culture Som...

Culture - Organizational Culture Some people think of culture as the character or personality of an organization. How an organization looks and "feels" when you enter it is a

Plant location, explain the rating plan method of plant location

explain the rating plan method of plant location

What are the main selection criteria for erp software?, Question 1 Warigon...

Question 1 Warigon is a retail company and they want to automate the payment system. Take up that you are the design engineer of that company. What are the aspects that you would

DORIC CONVERSION TECHNOLOGIES, Explain the ethical issues from Peter Johns...

Explain the ethical issues from Peter Johnson''s point of view.

Canteen, whom do you thikk rajender will eat with ?why

whom do you thikk rajender will eat with ?why

Ability diversity, Individual with disabilities are an under utilized human...

Individual with disabilities are an under utilized human resources. Many organisations, today, are hiring people with disabilities and provide them opportunities to unleash their t

What are the restrictions of the matrix organisation, What are the restrict...

What are the restrictions of the matrix organisation? Restrictions of matrix organization: a. Matrix organization violates the principle of unity of command as a person w

Determining economic order size, Economic order size is that size of the...

Economic order size is that size of the order which gives maximum economy in purchasing any item of material. The other terms used for economic order size are economic

What conclusions can you draw, QUESTION (i) Write short notes on a. ...

QUESTION (i) Write short notes on a. Callable Bonds b. Yield to Maturity c. Zero-Coupon Bonds (ii) Consider a bond with a 12% coupon rate and paying interest semi-a

Quantitave Analysis for management, Bakery produces muffins and doughnuts. ...

Bakery produces muffins and doughnuts. Let x1 be the number of doughnuts produced and x2 be the number of muffins produced. The profit function for the bakery is expressed by the

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd