Pricing a Heterogeneous Portfolio Based on a Demand Function |
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| Authors: | Yaniv Zaks PhD Esther Frostig Benny Levikson |
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| Institution: | 1. Department of Mathematics , Bar-Ilan University , Ramat-Gan , Israel;2. Department of Statistics , University of Haifa , Israel |
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| Abstract: | Abstract Consider a portfolio containing number of risk classes. Each class has its own demand function, which determines the number of insureds in this class as a function of the premium. The insurer determines the premiums based on the number of insureds in each class. The “market” reacts by updating the number of the policyholders, then the insurer updates the premium, and so on. We show that this process has an equilibrium point, and then we characterize this point. |
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