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Raffle Risk Valuation in With-Raffle Savings Account

Author

Listed:
  • Eduardo Fraga Lima de Melo

    (Superintendency of Private Insurance (SUSEP) and Rio de Janeiro State University (UERJ))

  • Sergio Luis Franklin Jr.

    (Superintendency of Private Insurance (SUSEP) and Pontifical Catholic University of Rio de Janeiro (PUC-Rio))

  • César da Rocha Neves

    (Pontifical Catholic University of Rio de Janeiro (PUC-Rio), Rio de Janeiro State University (UERJ), and Superintendency of Private Insurance (SUSEP))

Abstract

In this paper we present an approach for the assessment of raffle risk found in with-raffle savings account, a type of product offered by with-raffle savings societies. This risk can be defined as the possibility of losses due to the commitment to pay prizes above the expected value. It concerns the selling of the product to few investors and the uncertainty in the value paid by them, which is positively related to the prize the savings society must pay. Our results provide a simple valuation formula for practioners involved in this specific industry.

Suggested Citation

  • Eduardo Fraga Lima de Melo & Sergio Luis Franklin Jr. & César da Rocha Neves, 2012. "Raffle Risk Valuation in With-Raffle Savings Account," Brazilian Review of Finance, Brazilian Society of Finance, vol. 10(2), pages 197-213.
    • Handle: RePEc:brf:journl:v:10:y:2012:i:2:p:197-213
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    More about this item

    Keywords

    raffle risk; with-raffle savings account; with-raffle savings society;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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