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The Effect of FSD Changes in Multiplicative Background Risk on Risk-taking Attitude


  • Yoshitaka Sakagami


In this paper, we consider the effect of First-degree Stochastic Dominance (FSD) changes in background multiplicative risk on the risk- taking attitude of a decision maker. First, we consider contractive FSD changes in background multiplicative risk and analyze the effect of these changes. Then, we consider general FSD changes in background multiplicative risk. Also, in the context of coinsurance, we determine the effect of simple FSD changes and Monotone Likelihood Ratio (MLR) changes in multiplicative background risk.

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  • Yoshitaka Sakagami, 2005. "The Effect of FSD Changes in Multiplicative Background Risk on Risk-taking Attitude," Risk and Insurance 0506001, EconWPA.
  • Handle: RePEc:wpa:wuwpri:0506001
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    References listed on IDEAS

    1. Aleksander Janicki & Aleksander Weron, 1994. "Simulation and Chaotic Behavior of Alpha-stable Stochastic Processes," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook9401, June.
    2. Burnecki, Krzysztof & Misiorek, Adam & Weron, Rafal, 2010. "Loss Distributions," MPRA Paper 22163, University Library of Munich, Germany.
    3. Pavel Cizek & Wolfgang Karl Härdle & Rafal Weron, 2005. "Statistical Tools for Finance and Insurance," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0501, June.
    4. Härdle, Wolfgang Karl & Burnecki, Krzysztof & Weron, Rafał, 2004. "Simulation of risk processes," Papers 2004,01, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    5. Krzysztof Burnecki & Wolfgang Hardle & Rafal Weron, 2003. "An introduction to simulation of risk processes," HSC Research Reports HSC/03/04, Hugo Steinhaus Center, Wroclaw University of Technology.
    6. Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
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    FSD changes; Multiplicative background risk; risk-taking attitude;

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