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Universally Marketable Insurance Under Multivariate Mixtures

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  • Lo, Ambrose
  • Tang, Qihe
  • Tang, Zhaofeng

Abstract

The study of desirable structural properties that define a marketable insurance contract has been a recurring theme in insurance economic theory and practice. In this article, we develop probabilistic and structural characterizations for insurance indemnities that are universally marketable in the sense that they appeal to all policyholders whose risk preferences respect the convex order. We begin with the univariate case where a given policyholder faces a single risk, then extend our results to the case where multiple risks possessing a certain dependence structure coexist. The non-decreasing and 1-Lipschitz condition, in various forms, is shown to be intimately related to the notion of universal marketability. As the highlight of this article, we propose a multivariate mixture model which not only accommodates a host of dependence structures commonly encountered in practice but is also flexible enough to house a rich class of marketable indemnity schedules.

Suggested Citation

  • Lo, Ambrose & Tang, Qihe & Tang, Zhaofeng, 2021. "Universally Marketable Insurance Under Multivariate Mixtures," ASTIN Bulletin, Cambridge University Press, vol. 51(1), pages 221-243, January.
    • Handle: RePEc:cup:astinb:v:51:y:2021:i:1:p:221-243_8
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    Cited by:

    1. Qiuqi Wang & Ruodu Wang & Ricardas Zitikis, 2021. "Risk measures induced by efficient insurance contracts," Papers 2109.00314, arXiv.org, revised Sep 2021.
    2. Wang, Qiuqi & Wang, Ruodu & Zitikis, Ričardas, 2022. "Risk measures induced by efficient insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 103(C), pages 56-65.

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