Euler allocations in the presence of non-linear reinsurance: comment on Major (2018)

Pesenti, S. M., Millossovich, P. & Tsanakas, A. (2018). Euler allocations in the presence of non-linear reinsurance: comment on Major (2018). .

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Abstract

Major (2018) discusses Euler/Aumann-Shapley allocations for non-linear portfolios. He argues convincingly that many (re)insurance portfolios, while non-linear, are nevertheless positively homogeneous, owing to the way that deductibles and limits are typically set. For such non-linear but homogeneous portfolio structures, he proceeds with defining and studying a particular type of capital allocation. In this comment, we build on Major’s (2018) insights but take a slightly different direction, to consider Euler capital allocations for distortion risk measures applied to homogeneous portfolios. Thus, the important problem of capital allocation in portfolios with non-linear reinsurance is solved.

Item Type: Monograph (Working Paper)
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/19335

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