Determination of risk pricing measures from market prices of risk
AbstractA new insurance provider or a regulatory agency may be interested in determining a risk measure consistent with observed market prices of a collection of risks. Using a relationship between distorted coherent risk measures and spectral risk measures, we provide a method for reconstructing distortion functions from the observed prices of risk. The technique is based on an appropriate application of the method of maximum entropy in the mean, which builds upon the classical method of maximum entropy.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 43 (2008)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/locate/inca/505554
Distortion function Spectral measures Risk aversion function Maximum entropy in the mean Inverse problems;
Other versions of this item:
- Henryk Gzyl & Silvia Mayoral, . "Determination of Risk Pricing Measures from Market Prices of Risk," Faculty Working Papers 03/07, School of Economics and Business Administration, University of Navarra.
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