Abstract
This work uses classic stochastic dynamic programming techniques to determine the equivalence premium that each of two extraction agents of a non-renewable natural resource must pay to an insurer to cover the risk that the extraction pore explodes. We use statistical and geological methods to calibrate the time-until-failure distribution of extraction status for each agent and couple a simple approximation scheme with the actuarial standard of Bühlmann’s recommendations to charge the extracting agents a variance premium, while the insurer earns a return on its investment at risk. We test our analytical results through Monte Carlo simulations to verify that the probability of ruin does not exceed a certain predetermined level.
| Lingua originale | English |
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| Numero di articolo | 2242 |
| Rivista | Mathematics |
| Volume | 10 |
| Numero di pubblicazione | 13 |
| DOI | |
| Stato di pubblicazione | Published - 1 lug 2022 |