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Isotonic Optimization in Tariff Construction

Published online by Cambridge University Press:  29 August 2014

W.S. Jewell
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Abstract

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The problem of the best fit to set ideal values under general inequality order restrictions is examined for asymmetric, quadratic, absolute, and Chebyshev norms. Special solution procedures are given in terms of network flow algorithms over a network associated with the given isotonic order relations, and the nature of the optimal solutions is characterized for the different norms.

The model is formulated in terms of finding an optimal insurance rate structure over given risk classes for which a desired pattern of tariffs can be specified. The suitability of different norms is considered in the context of corporate profitability, and the relationship to a simple rate relativities model is described.

Keywords

isotonic RegressionLinear ProgrammingQuadratic Programming Network Flows Approximation Theory Insurance Ratemaking
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 8 , Issue 2 , September 1975 , pp. 175 - 203
Copyright
Copyright © International Actuarial Association 1975

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