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Premium Calculation by Transforming the Layer Premium Density

Author

Listed:
  • Wang, S.

Abstract

This paper examines a class of premium principles which are (i) comonotonic additive and (ii) preserving stochastic dominance. The representation for this class is a transform on the decumulative distribution function. It has close connections with the recent developments in economic decision theory (e.g. Yaari, 1987). The proportional hazard transform may provide an alternative to the variance as a risk measure.

Suggested Citation

  • Wang, S., 1994. "Premium Calculation by Transforming the Layer Premium Density," Working Papers 030, Risk and Insurance Archive.
    • Handle: RePEc:wop:riskar:030
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    References listed on IDEAS

    as
    1. repec:cup:astinb:v:1:y:1961:i:05:p:245-255_00 is not listed on IDEAS
    2. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    3. repec:cup:astinb:v:21:y:1991:i:02:p:223-230_00 is not listed on IDEAS
    4. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    5. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
    6. repec:cup:astinb:v:22:y:1992:i:02:p:247-254_00 is not listed on IDEAS
    7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    8. repec:cup:astinb:v:20:y:1990:i:02:p:181-190_00 is not listed on IDEAS
    9. Reich, Axel, 1986. "Properties of premium calculation principles," Insurance: Mathematics and Economics, Elsevier, vol. 5(1), pages 97-101, January.
    10. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    11. Shaun, Wang, 1995. "Insurance pricing and increased limits ratemaking by proportional hazards transforms," Insurance: Mathematics and Economics, Elsevier, vol. 17(1), pages 43-54, August.
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    Cited by:

    1. Tianxing Yan & Yi Lu & Himchan Jeong, 2024. "Dependence Modelling for Heavy-Tailed Multi-Peril Insurance Losses," Risks, MDPI, vol. 12(6), pages 1-17, June.

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