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A Radical Shift in Managing Risks: Practical Applications of Complexity Theory

Chichilnisky, Graciela (1998): A Radical Shift in Managing Risks: Practical Applications of Complexity Theory. Published in: Contingencies, American Academy of Actuaries No. January/February 1998 (January 1998): pp. 28-32.

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Abstract

Complexity theory is designed to bring order out of a rough-and- tumble world, something close to every insurance professional's or actuary's heart. Whether applied in the laboratory or as part of a mathematical model, it can do wonderful things . But in the real world it's just what its name says-a theory. It may help us understand why things go one way or another, but it can't foretell those things with such certainty that an insurance company could, say, set its rates based on the knowledge that only one hurricane will strike Florida during the coming year...

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