Brosins - Table M Construction

Question 1

Advantages of analysis by vertical slices - Per-risk view

Answer 1

Advantages:

1. Natural approach. The analysis corresponds to the way data is presented
2. Easy to understand. To measure the effect of loss limitation, losses are limited & compared to unlimited losses.
3. Quick way to compute insurance charge for one entry ratio

Question 2

Disadvantages of analysis by vertical slices - Per-risk view

Answer 2

1. Process must be repeated for each entry ratio

2. process becomes cumbersome when dealing with thousands of risk in a sample

Question 3

Advantages of analysis by horizontal slices - Per-layer view

Answer 3

1. method used in practice to construct table M

2. works well when there are many risks

Question 4

Disadvantages of analysis by horizontal slices - Per-layer view

Answer 4

1. More difficult to understand

2. require initial data preparation b/c data is not ordinarily presented this way.