THE DETERMINATION OF THE RISK PREMIUM OF A CYBER INSURANCE WITH A COMPONENT OF THE TOTAL LOSS FOLLOWING A KUMARASWAMY DISTRIBUTION

• Main Author: Pratama, Randhy
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/55192
• Institution: Institut Teknologi Bandung

The activities of internet users have skyrocketed in the last two decades with the increasing advances in Information Technology. Along with the developments in information technology, cyber-attacks are also increasing. Cyber insurance is one method of protections against financial losses due to cyber-attacks. The purpose of this study is to model the financial losses due to cyber-attacks and to determine the risk premium of a cyber insurance. In this study, the financial losses considered are losses caused by the “infections” on computers or devices; and losses due to business interruptions due to time required for recovery. The model of the financial losses was built using Markov Chain and Graph Theory with one of the components in the function of the aggregate loss follows a Kumaraswamy distribution. Using the Monte Carlo simulation, the model is then used to determine the risk premium of a cyber insurance using three risk measures, namely: the Standard Deviation Principle; Value-at-Risk or VaR; and Tail Value-at-Risk or TVaR.