Venter and Sahasrabuddhe Win 2015 Variance Prize
The Variance Prize for papers published in Variance volume 9 has been awarded to Gary Venter and Rajesh Sahasrabuddhe for their paper “A Note on Parameter Risk.” The winning paper explores parameter risk, the uncertainty associated with the parameter values that are used to model a stochastic process. Unlike process risk, parameter risk does not diversify away when modeling a greater number of independent exposures. Thus, inadequate recognition of parameter risk can lead to a significant understatement in the actual risk of the underlying process.
In “A Note on Parameter Risk,” Venter and Sahasrabuddhe examine the parameter uncertainty models associated with several common actuarial approaches to estimating parameters. This inventory of uncertainty models can provide a framework for better quantification of risk, and thus potentially better decision-making regarding underwriting and pricing of risks.
The Variance Prize honors original thinking and research in property/casualty actuarial science and is awarded to the author or authors of the best paper published in each volume year. To be eligible, a paper must show original research and the solution of advanced insurance problems.
Gary Venter, FCAS, CERA, ASA, MAAA, is head of economic capital modeling at Chartis and teaches graduate courses in actuarial science at Columbia University. His 35+ years in the insurance and reinsurance industry has included stints at the Instrat group, which migrated from EW Payne through Sedgwick to Guy Carpenter; the Workers Compensation Reinsurance Bureau; the National Council on Compensation Insurance; Prudential Reinsurance; and Fireman’s Fund.
Rajesh Sahasrabuddhe has provided actuarial consulting services for most of his career, including positions at a Big Four audit firm, an international brokerage firm, and a litigation support firm. He is currently employed in the actuarial practice at a leading management consulting firm.
The winning paper was published in Variance volume 9, number 1.