Usage of Excel in stochastic/probabilistic Loss calculation – simulation of loss ratios for 2m of water depth caused by Tsunami.
accounting
Description
HOMEWORK
Usage of Excel in stochastic/probabilistic Loss
calculation – simulation of loss ratios for 2m of water depth caused by
Tsunami.
- Go to MS Excel.
- Simulate 1,000 realisations from a distribution
(mean loss ratio = 55%, standard deviation 20%).
- The insured value of a house is 100,000 AUD
(single storey masonry). Calculate the loss for each realisation.
- Apply a tsunami flood limit of 15,000 AUD to
each realisation.
- Calculate the mean for loss before (=from
ground up [FGU] loss) and after limit application (=gross loss [GR]).
- Compare with deterministic approach (no
simulation just use mean loss ratio to calculate both FGU and GR loss).
ANALYSIS:
- Which distribution would you use to simulate
the loss ratios and why?
- Is the loss ratio appropriate for the
particular risk (a tree house) a and peril (tsunami)?
- What is/are the practical effect/s of using
probabilistic approach rather than the simple deterministic one? Is there
a difference in this/these effect/s between FGU and GR loss?
Please send the Excel file
with simulation and answers.
