The Barcelona Insurance and Risk Management Summer School to be held in 2011 will be devoted to Financial and Insurance Applications of Markov Chains. It is a two-day workshop on the fundamentals of discrete processes and applications to finane, risk management and insurance. The invited intensive seminar will be given by Prof. Jean Lemaire from the Wharton School (University of Pennsylvania). the Summer School is organized by RFA-IREA and it is sponsored by the Spanish Ministry of Science / FEDER.

This seminar first will cover Poisson processes and extensions that are useful in modeling insurance claim counts.  Then the theory of discrete Markov Chains will be developed, leading to numerous practical examples of applications in insurance, finance, and medical sciences.  Examples include: 1. Bonus-Malus Systems in automobile insurance, including a full analysis of a Spanish system; 2. A credit scoring model; 3. A model for genetic diseases; 4. Adverse selection in insurance due to genetic testing; 5. A model for cash flows in a retirement community.

The seminar is designed for actuarial and statistics students, as well as practicing actuaries.  Insurance professionals and future actuaries will learn new models to apply to their fields.  Students majoring in statistics may find in this seminar an intriguing blend of practical applications of stochastic processes.

While every effort will be made to make the seminar self-contained, a pre-requisite is some basic knowledge of probability and statistics, typically covered in a two-semester undergraduate statistics course.  The seminar will include two hands-on computer sessions, during which students solve in small groups a cash flow problem, and study a Spanish bonus-malus system using Excel.  Participants are welcome to bring their own laptops.  The material will be illustrated by numerous practice questions from past actuarial exams.  Class material, consisting in a study note about Markov Chains, an article on bonus-malus systems, and a package of past exam questions, will be distributed at the start of the seminar. 

Academic information

The seminar will be taught in English by Prof. Jean Lemaire, Director of the Actuarial Science Program at the Wharton School.  Dr. Lemaire has published over 100 articles in non-life actuarial science.  His books “Automobile Insurance” and “Bonus-Malus Systems in Automobile Insurance” have won insurance “Book-of-the-Year” awards both in Europe and the US, and have been translated in Mandarin, Japanese, Korean, Russian, French, and Spanish.  Dr. Lemaire has taught this and other seminars in over 60 countries around the world.  He is an Honorary Chairman of ASTIN, the non-life section of the International Actuarial Association.  In 2008, he was voted best Professor of the Wharton School.