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Beneficial changes in random variables via copulas: An application to insurance

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  • Luisa Tibiletti

    (Istituto di Matematica Finanziaria, University of Torino, Piazza Arbarello, 8, 10122 Torino, Italy)

Abstract

A risk-averse agent does not necessarily decrease the optimal insurance whenever a beneficial change in the distribution of final wealth occurs. This paper provides sufficient conditions to guarantee such a decrease. Beneficial changes can be induced by either a beneficial loss-distribution shift, by a modification of the dependence structure between the randomness sources, or by both of these. Conditions for each case are stated. Hadar-Seo and Meyer results turn out as special cases. The Geneva Papers on Risk and Insurance Theory (1995) 20, 191–202. doi:10.1007/BF01258396

Suggested Citation

  • Luisa Tibiletti, 1995. "Beneficial changes in random variables via copulas: An application to insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 20(2), pages 191-202, December.
    • Handle: RePEc:pal:genrir:v:20:y:1995:i:2:p:191-202
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    Cited by:

    1. Mendoza-Velázquez, Alfonso & Galvanovskis, Evalds, 2009. "Introducing the GED-Copula with an application to Financial Contagion in Latin America," MPRA Paper 46669, University Library of Munich, Germany, revised 01 Feb 2010.
    2. Eichner, Thomas & Wagener, Andreas, 2011. "Increases in skewness and three-moment preferences," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 109-113, March.
    3. Henri Loubergé, 1998. "Risk and Insurance Economics 25 Years After," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 23(4), pages 540-567, October.
    4. Ortega, Eva-María & Escudero, Laureano F., 2010. "On expected utility for financial insurance portfolios with stochastic dependencies," European Journal of Operational Research, Elsevier, vol. 200(1), pages 181-186, January.
    5. Thomas Eichner & Andreas Wagener, 2009. "Multiple Risks and Mean-Variance Preferences," Operations Research, INFORMS, vol. 57(5), pages 1142-1154, October.
    6. Eichner, Thomas & Wagener, Andreas, 2012. "Tempering effects of (dependent) background risks: A mean-variance analysis of portfolio selection," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 422-430.
    7. Thomas Eichner & Andreas Wagener, 2004. "The Welfare State in a Changing Environment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 313-331, May.

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