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Premium Calculation by Transforming the Layer Premium Density

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  • 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
    as

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    References listed on IDEAS

    as
    1. Venter, Gary G., 1991. "Premium Calculation Implications of Reinsurance Without Arbitrage," ASTIN Bulletin, Cambridge University Press, vol. 21(2), pages 223-230, November.
    2. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    3. Denneberg, Dieter, 1990. "Premium Calculation: Why Standard Deviation Should be Replaced by Absolute Deviation1," ASTIN Bulletin, Cambridge University Press, vol. 20(2), pages 181-190, November.
    4. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    5. Borch, Karl, 1961. "The Utility Concept Applied to the Theory of Insurance," ASTIN Bulletin, Cambridge University Press, vol. 1(5), pages 245-255, July.
    6. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    7. 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.
    8. Albrecht, Peter, 1992. "Premium Calculation Without Arbitrage? A note on a contribution by G. Venter," ASTIN Bulletin, Cambridge University Press, vol. 22(2), pages 247-254, November.
    9. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    10. Reich, Axel, 1986. "Properties of premium calculation principles," Insurance: Mathematics and Economics, Elsevier, vol. 5(1), pages 97-101, January.
    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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