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Multi-Period Risk Sharing under Financial Fairness

Author

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  • Bao, Hailong

    (Tilburg University, School of Economics and Management)

  • Ponds, Eduard

    (Tilburg University, School of Economics and Management)

  • Schumacher, Hans

    (Tilburg University, School of Economics and Management)

Abstract

We work with a multi-period system where a finite number of agents need to share multiple monetary risks. We look for the solutions that are both Pareto efficient utility-wise and financially fair value-wise. A buffer enables the inter-temporal capital transfer. Expected utility is used to evaluate the utility, and a risk-neutral measure is essential for determining the risk sharing rules. It can be shown that in the model setting there always exists a unique risk sharing rule that is both Pareto efficient and financially fair. An iterative algorithm is introduced to calculate this rule numerically.
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Suggested Citation

  • Bao, Hailong & Ponds, Eduard & Schumacher, Hans, 2015. "Multi-Period Risk Sharing under Financial Fairness," Other publications TiSEM 835f69a4-709c-4967-b15c-6, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:835f69a4-709c-4967-b15c-6237ebe9e6e2
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    References listed on IDEAS

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    Cited by:

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