We describe two procedures that assist insurance firms in determining shareholders' risk tolerance thresholds and in using such thresholds within the decision-making process. The first procedure is based on parsimonious measures of the risk/return tradeoff such as the Sharpe Ratio; the second procedure makes a direct use of expected utility theory.
Risk tolerance levels for insurance companies
BATTAUZ, ANNA;DE DONNO, MARZIA;SBUELZ, ALESSANDRO;TOLOTTI, MARCO
2009
Abstract
We describe two procedures that assist insurance firms in determining shareholders' risk tolerance thresholds and in using such thresholds within the decision-making process. The first procedure is based on parsimonious measures of the risk/return tradeoff such as the Sharpe Ratio; the second procedure makes a direct use of expected utility theory.
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