Optimal time to change premiums

Abstract

The claim arrival process to an insurance company is modeled by a compound Poisson process whose intensity and/or jump size distribution changes at an unobservable time with a known distribution. It is in the insurance company's interest to detect the change time as soon as possible in order to re-evaluate a new fair value for premiums to keep its profit level the same. This is equivalent to a problem in which the intensity and the jump size change at the same time but the intensity changes to a random variable with a know distribution. This problem becomes an optimal stopping problem for a Markovian sufficient statistic. Here, a special case of this problem is solved, in which the rate of the arrivals moves up to one of two possible values, and the Markovian sufficient statistic is two-dimensional.

Mathematical model of detecting disorders in service systems

“…Various mathematical models of the above problem were investigated in [1], [2], [4]- [6], [8]- [10] for a single line, and in [3], [7] for two lines. They are special kinds of stochastic optimization problems in which one looks for an optimal stopping time , that is a stopping time which minimizes the suitable mean cost criterion.…”