Bilateral risk sharing with heterogeneous beliefs and exposure constraints

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Collection: Articles
Title: Bilateral risk sharing with heterogeneous beliefs and exposure constraints / Tim J. Boonen, Mario Ghossoub
Author: Boonen, Tim J.
Notes: Sumario: This paper studies bilateral risk sharing under no aggregate uncertainty, where one agent has Expected-Utility preferences and the other agent has Rankdependent utility preferences with a general probability distortion function. We impose exogenous constraints on the risk exposure for both agents, and we allow for any type or level of belief heterogeneity.We show that Pareto-optimal risk-sharing contracts can be obtained via a constrained utility maximization under a participation constraint of the other agent. This allows us to give an explicit characterization of optimal risk-sharing contracts. In particular, we show that an optimal risk-sharing contract contains allocations that are monotone functions of the likelihood ratio, where the latter is obtained from Lebesgue's Decomposition Theorem.
Related records: En: Astin bulletin. - Belgium : ASTIN and AFIR Sections of the International Actuarial Association = ISSN 0515-0361. - 01/01/2020 Volumen 50 Número 1 - enero 2020 , p. 293-323
Materia / lugar / evento: Cálculo actuarial Modelos actuariales Cálculo de probabilidades Distribución de riesgos
Other authors: Boonen, Tim J.
Ghossoub, Mario
Other categories: 6
Rights: In Copyright (InC):
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