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Loss reserving using loss aversion functions

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  • Choo, Weihao
  • de Jong, Piet

Abstract

This article discusses the determination of risk capital based on "aversion" functions. Aversion functions weigh different outcomes according to perceived severity. Many practical and popular risk measures are usefully viewed in terms of aversion functions including those arising from distortion operators and risk margin loadings. The approach of this paper builds on, unifies, and extends existing disparate approaches discussed in the literature. Analytical and computer generated illustrations are given as well as suggestions for the practical determination of aversion functions.

Suggested Citation

  • Choo, Weihao & de Jong, Piet, 2009. "Loss reserving using loss aversion functions," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 271-277, October.
    • Handle: RePEc:eee:insuma:v:45:y:2009:i:2:p:271-277
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    References listed on IDEAS

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    Cited by:

    1. Choo, Weihao & de Jong, Piet, 2015. "The tradeoff insurance premium as a two-sided generalisation of the distortion premium," Insurance: Mathematics and Economics, Elsevier, vol. 65(C), pages 238-246.
    2. Choo, Weihao & de Jong, Piet, 2016. "Insights to systematic risk and diversification across a joint probability distribution," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 142-150.
    3. Psarrakos, Georgios & Toomaj, Abdolsaeed & Vliora, Polyxeni, 2024. "A family of variability measures based on the cumulative residual entropy and distortion functions," Insurance: Mathematics and Economics, Elsevier, vol. 114(C), pages 212-222.
    4. Jianxi Su & Edward Furman, 2016. "A form of multivariate Pareto distribution with applications to financial risk measurement," Papers 1607.04737, arXiv.org.
    5. Kaluszka, M. & Laeven, R.J.A. & Okolewski, A., 2012. "A note on weighted premium calculation principles," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 379-381.

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