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A method for determining risk aversion functions from uncertain market prices of risk

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  • Gzyl, Henryk
  • Mayoral, Silvia

Abstract

In Gzyl and Mayoral (2008) we developed a technique to solve the following type of problems: How to determine a risk aversion function equivalent to pricing a risk with a load, or equivalent to pricing different risks by means of the same risk distortion function. The information on which the procedure is based consists of the market prices of the risk. Here we extend that method to cover the case in which there may be uncertainties in the market prices of the risks.

Suggested Citation

  • Gzyl, Henryk & Mayoral, Silvia, 2010. "A method for determining risk aversion functions from uncertain market prices of risk," Insurance: Mathematics and Economics, Elsevier, vol. 47(1), pages 84-89, August.
  • Handle: RePEc:eee:insuma:v:47:y:2010:i:1:p:84-89
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    References listed on IDEAS

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    1. Acerbi, Carlo, 2002. "Spectral measures of risk: A coherent representation of subjective risk aversion," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1505-1518, July.
    2. Gzyl, Henryk & Mayoral, Silvia, 2008. "Determination of risk pricing measures from market prices of risk," Insurance: Mathematics and Economics, Elsevier, vol. 43(3), pages 437-443, December.
    3. Wang, Shaun, 1996. "Premium Calculation by Transforming the Layer Premium Density," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 26(01), pages 71-92, May.
    4. D. Vyncke & M. J. Goovaerts & A. De Schepper & R. Kaas & J. Dhaene, 2003. "On the Distribution of Cash Flows Using Esscher Transforms," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 563-575.
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    Cited by:

    1. Gzyl, Henryk & Mayoral, Silvia, 2016. "Determination of zero-coupon and spot rates from treasury data by maximum entropy methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 456(C), pages 38-50.
    2. Gzyl, Henryk & ter Horst, Enrique & Molina, German, 2015. "Application of the method of maximum entropy in the mean to classification problems," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 437(C), pages 101-108.

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