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arXiv · 2107.01730

Asymptotic Analysis of Risk Premia Under Linear Risk Sharing with Law-Invariant Risk Measures

Thomas Knispel·Roger J. A. Laeven·Gregor Svindland
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Abstract

We investigate the asymptotic behavior of the risk premium associated with a linear risk sharing contract in an infinitely expanding risk pool. We consider general preferences represented by law-invariant robust utility functionals. These preferences encompass the rank-dependent utility model as a special case. We also examine Pareto optimality of general and, in particular, linear risk sharing rules with these preferences. Our analysis is not limited to the classical i.i.d. setting, but allows for heterogeneous risks. Two case studies on actuarial pricing for independent but heterogeneous risks illustrate our results.

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Thomas Knispel, Roger J. A. Laeven, Gregor Svindland. 2021-07-04. Asymptotic Analysis of Risk Premia Under Linear Risk Sharing with Law-Invariant Risk Measures. https://arxiv.org/abs/2107.01730

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