Actuarial Theory for Dependent Risks
Chapter One
Modelling Risks
A risk can be described as an event that may or may not take place, and that brings about
some adverse financial consequences. It is thus natural that the modelling of risks uses
probability theory. The basics of probability theory are briefly reviewed in this first chapter,
with special emphasis on multivariate tools, such as random vectors and related quantities.
The material introduced here will be extensively used throughout the book.
1.1 INTRODUCTION
Much of our life is based on the belief that the future is largely unpredictable. We express
this belief by the use of words such as 'random' or 'probability' and we aim to assign
quantitative meanings to such usage. The branch of mathematics dealing with uncertainty
and randomness is called probability theory. Together with statistics, it forms the basis of
actuarial science.
In a broad sense, insurance refers to the business of transferring (totally or partially) the
economic impact of unforeseen mishaps. The central notion i ... read full excerpt from Actuarial Theory for Dependent Risks: Measures, Orders and Models ebook
