COURSE SYLLABUS

Course Number:

MA 195h.5

Course Title:

Seminar in Risk Theory

Department

Mathematics

School: Science and Engineering

Semester

Second

School Year:

Instructor

Gerardo S. Salas

2013-14

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. Course Objective
To provide students with different concepts and techniques to model and measure risks
associated with insurance systems.
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., 1992, Insurance Risk Models., Schaumburg, Ill.: Society of
Actuaries
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.
F. Course Requirements :

Math 22 and Math 151

G. Grading System

Quizzes and Assignments

Chapter Exams
Final Exam

30%
50%
20%

Example:
HOMEWORK / QUIZ

CHAP 1

CHAP 2

CHAP 3

Ave
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
H. Consultation Hours
By Appointment.
Phone :
Email :

0928 5079130
gerry_salas@bluecross.com.ph