The Mathematics of On-Leveling

The mathematical foundation of on-leveling premium is explicitly stated. This is combined with an appropriate set of assumptions to derive the formulae for on-leveling premium by rate book (described within) and for using the Parallelogram Method. It is demonstrated in an appendix that this foundation subsumes all works in the bibliography. It is observed that rate book on-leveling has fewer assumptions than the Parallelogram Method and thus, if database granularity permits, the Parallelogram Method should be abandoned.

Keywords: On-leveling, Parallelogram Method