City Research Online

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.

Publication Type:	Monograph (Working Paper)
Additional Information:	This is the pre-peer reviewed version of this article published in final form in Insurance: Mathematics and Economics available at https://doi.org/10.1016/j.insmatheco.2018.09.001
Publisher Keywords:	Distortion risk measures, capital allocation, Euler allocation, Aumann- Shapley, reinsurance, aggregation.
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management Q Science > QA Mathematics
Departments:	Bayes Business School > Actuarial Science & Insurance

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