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of risk theory allows mathematical determination of
an appropriate risk loading. In solvency assessment,
risk theory leads to measurement of ruin probability
based on particular premium writings and surplus
positions.

(ii) The financial area involves utility theory and game
theory, which apply to individuals, families, and
entities retaining and sharing the risks, and the
insurers. In utility theory, levels of satisfaction or
utility are established to correspond with various
possible outcomes As individuals and entities such
as corporations are not necessarily twice as satisfied
with twice as much money, mathematical functions
are assumed to describe the intangible satisfaction
levels of the decision maker.

The shape of the describing function corresponds
with the individual's or entity's attitude toward risk.
Game theory contemplates the involvement of more
than one player, each with a set of strategies. The
payoffs of the game are dependent on the
intersection of the strategies chosen by the players.

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