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A Comonotonic Image of Independence for Additive Risk Measures

Author

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  • Marc J. Goovaerts

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam, and Cath. University of Leuven, Center for Risk and Insurance Studies)

  • Rob Kaas

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Roger J.A. Laeven

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Qihe Tang

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

This paper presents a new axiomatic characterization of risk measures that are additive for independent random variables. In contrast to previous work, we include an axiom that guarantees monotonicity of the risk measure. Furthermore, the axiom of additivity for independent random variables is related to an axiom of additivity for comonotonic random variables. The risk measure characterized can be regarded as a mixed exponential premium.

Suggested Citation

  • Marc J. Goovaerts & Rob Kaas & Roger J.A. Laeven & Qihe Tang, 2004. "A Comonotonic Image of Independence for Additive Risk Measures," Tinbergen Institute Discussion Papers 04-030/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20040030
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    References listed on IDEAS

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    1. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    2. Wu, Xianyi & Wang, Jinglong, 2003. "On Characterization of Distortion Premium Principle," ASTIN Bulletin, Cambridge University Press, vol. 33(1), pages 1-10, May.
    3. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    4. Gerber, Hans U., 1974. "On Additive Premium Calculation Principles," ASTIN Bulletin, Cambridge University Press, vol. 7(3), pages 215-222, March.
    5. J. Dhaene & S. Vanduffel & M. Goovaerts, 2007. "Comonotonicity," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 265-278.
    6. Van Heerwaarden, A. E. & Kaas, R. & Goovaerts, M. J., 1989. "Properties of the Esscher premium calculation principle," Insurance: Mathematics and Economics, Elsevier, vol. 8(4), pages 261-267, December.
    7. Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: theory," Insurance: Mathematics and Economics, Elsevier, vol. 31(1), pages 3-33, August.
    8. Denuit, Michel, 2001. "Laplace transform ordering of actuarial quantities," Insurance: Mathematics and Economics, Elsevier, vol. 29(1), pages 83-102, August.
    9. Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: applications," Insurance: Mathematics and Economics, Elsevier, vol. 31(2), pages 133-161, October.
    10. Goovaerts, Marc J. & Kaas, Rob & Dhaene, Jan & Tang, Qihe, 2003. "A Unified Approach to Generate Risk Measures," ASTIN Bulletin, Cambridge University Press, vol. 33(2), pages 173-191, November.
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    More about this item

    Keywords

    Risk measures; Additivity; Exponential order; Laplace transform order; Esscher transform; Comonotonicity;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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