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Premium Calculation by Transforming the Layer Premium Density

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Author Info
Wang, S.
Abstract

This paper examines a class of premium principles which are (i) comonotonic additive and (ii) preserving stochastic dominance. The representation for this class is a transform on the decumulative distribution function. It has close connections with the recent developments in economic decision theory (e.g. Yaari, 1987). The proportional hazard transform may provide an alternative to the variance as a risk measure.

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Paper provided by Risk and Insurance Archive in its series Working Papers with number 030.

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Date of creation: Aug 1994
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Handle: RePEc:wop:riskar:030

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Related research
Keywords: Insurance pricing comonotonicity stochastic dominance mean- variance analysis

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Shaun, Wang, 1995. "Insurance pricing and increased limits ratemaking by proportional hazards transforms," Insurance: Mathematics and Economics, Elsevier, vol. 17(1), pages 43-54, August. [Downloadable!] (restricted)
  2. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March. [Downloadable!] (restricted)
  3. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December. [Downloadable!] (restricted)
  4. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January. [Downloadable!] (restricted)
  5. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June. [Downloadable!] (restricted)
  6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
  7. Reich, Axel, 1986. "Properties of premium calculation principles," Insurance: Mathematics and Economics, Elsevier, vol. 5(1), pages 97-101, January. [Downloadable!] (restricted)
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