Browsing by Author "Mohamed, Mohamed"
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Item A comparative study on value at risk and conditional value at risk with an application to the Malaysian financial market(African Journal of Business Management, 2012-03-14) Mohamed, Mohamed; Ismail, Noriszura; Razali, AhmadValue at risk (VaR) and conditional value at risk (CVaR) are frequently used as risk measures in risk management. VaR estimates the maximum expected loss over a given time period at a given acceptance level, whereas CVaR measures the extreme risk or the risk beyond VaR. This paper aims to perform an empirical study on VaR and CVaR based on the daily returns of the Malaysian stock markets traded in Kuala Lumpur Composite Index (KLCI) over a time period using the RiskMetrics and the peaks over the threshold (POT) methods. In particular, the IGARCH (1, 1) model is applied for the RiskMetrics method, whereas the generalized Pareto distribution (GPD), a distribution based on an extreme value theory, is considered for the POT method. The results show that the GPD, which is considered in the POT method, provides an adequate fit to the data of threshold excesses, and the POT is a more reliable measure of risks compared to the RiskMetrics.Item Approximation of Aggregate Losses Using Simulation(Journal of Mathematics and Statistics, 2010) Mohamed, Mohamed; Razali, Ahmad; Ismail, NoriszuraProblem statement: The modeling of aggregate losses is one of the main objectives in actuarial theory and practice, especially in the process of making important business decisions regarding various aspects of insurance contracts. The aggregate losses over a fixed time period is often modeled by mixing the distributions of loss frequency and severity, whereby the distribution resulted from this approach is called a compound distribution. However, in many cases, realistic probability distributions for loss frequency and severity cannot be combined mathematically to derive the compound distribution of aggregate losses. Approach: This study aimed to approximate the aggregate loss distribution using simulation approach. In particular, the approximation of aggregate losses was based on a compound Poisson-Pareto distribution. The effects of deductible and policy limit on the individual loss as well as the aggregate losses were also investigated. Results: Based on the results, the approximation of compound Poisson-Pareto distribution via simulation approach agreed with the theoretical mean and variance of each of the loss frequency, loss severity and aggregate losses. Conclusion: This study approximated the compound distribution of aggregate losses using simulation approach. The investigation on retained losses and insurance claims allowed an insured or a company to select an insurance contract that fulfills its requirement. In particular, if a company wants to have an additional risk reduction, it can compare alternative policies by considering the worthiness of the additional expected total cost which can be estimated via simulation approach.Item Own Damage, Third Party Property Damage Claims and Malaysian Motor Insurance: An Empirical Examination(Australian Journal of Basic and Applied Sciences, 2011) Mohamed, Mohamed; Ismail, Hamizun; Razali, Ahmad; Ismail, Noriszura; Ganiyat, AdesinaRisk is an indication of uncertainty about variability in the outcomes around some expected values. One can concludes that risk has its cost which depends on the level of uncertainty about the variability surrounding the expected values. Therefore, various types of risk exist in different sectors of human endeavors that deserve attentions. Thus, different risk management devices are formulated to minimize risk and its cost. Motor insurance policy is one of such policy usually purchased to reduce risk and financial losses associated with motor accident. This is usually aimed at mitigating loss reduction. Direct losses may arise from auto accident which may cause physical damage to the owner of the vehicle, the vehicle and the third party property. This paper examined the effects of own damage claims and third party property damage claims to the risk exposure of Malaysian insurers for three years from 2001 to 2003. Generalized Lease Square (GLS) was employed to examine these effects. It was found that own damage may not constitute a big treat to the total risk exposure of Malaysian insurer. While it increases their risk exposure by 2% which is not statistically significant; the third party property damage increased motor insurers’ risk by almost 15%. Based on the significant statistics, we found the Malaysian insurers’ risk exposure reduced with a higher premium the third party property damage in motor insurance policy.