Abstract
Risk measures based on distorted probabilities have been recently developed in actuarial science and applied to insurance rate making. We propose a risk measure that has the properties of risk aversion and diversification, is additive for losses and consistent in its treatment of insurance and investment risks. We show that the risk measure based on distorted probabilities is not consistent in its ordering of insurance and investment risks.
| Original language | English |
|---|---|
| Pages (from-to) | 103-115 |
| Number of pages | 13 |
| Journal | Insurance: Mathematics and Economics |
| Volume | 29 |
| Issue number | 1 |
| DOIs | |
| State | Published - 20 Aug 2001 |
Keywords
- D81
- Distortion function
- Diversification
- G11
- G22
- Premium principles
- Risk measure
ASJC Scopus subject areas
- Statistics and Probability
- Economics and Econometrics
- Statistics, Probability and Uncertainty