UNIVERSALLY MARKETABLE INSURANCE UNDER MULTIVARIATE MIXTURES

Ambrose Lo; Qihe Tang; Zhaofeng Tang

doi:10.1017/asb.2020.41

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UNIVERSALLY MARKETABLE INSURANCE UNDER MULTIVARIATE MIXTURES

Journal article

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UNIVERSALLY MARKETABLE INSURANCE UNDER MULTIVARIATE MIXTURES

Ambrose Lo, Qihe Tang and Zhaofeng Tang

ASTIN bulletin, Vol.51(1), pp.221-243

01/01/2021

DOI: 10.1017/asb.2020.41

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http://hdl.handle.net/1959.4/unsworks_76462View

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Abstract

The study of desirable structural properties that define a marketable insurance contract has been a recurring theme in insurance economic theory and practice. In this article, we develop probabilistic and structural characterizations for insurance indemnities that are universally marketable in the sense that they appeal to all policyholders whose risk preferences respect the convex order. We begin with the univariate case where a given policyholder faces a single risk, then extend our results to the case where multiple risks possessing a certain dependence structure coexist. The non-decreasing and 1-Lipschitz condition, in various forms, is shown to be intimately related to the notion of universal marketability. As the highlight of this article, we propose a multivariate mixture model which not only accommodates a host of dependence structures commonly encountered in practice but is also flexible enough to house a rich class of marketable indemnity schedules.

Business & Economics

Economics

Mathematical Methods In Social Sciences

Mathematics

Mathematics, Interdisciplinary Applications

Physical Sciences

Science & Technology

Social Sciences

Social Sciences, Mathematical Methods

Statistics & Probability

Details

Title: Subtitle: UNIVERSALLY MARKETABLE INSURANCE UNDER MULTIVARIATE MIXTURES
Creators: Ambrose Lo - Univ Iowa, Dept Stat & Actuarial Sci, Iowa City, IA 52242 USA
Qihe Tang - Univ Iowa, Dept Stat & Actuarial Sci, Iowa City, IA 52242 USA
Zhaofeng Tang - S&P Global Ratings, Model Validat Grp, One Prudential Plaza Suite 3600,130 East Randolph, Chicago, IL 60601 USA
Resource Type: Journal article
Publication Details: ASTIN bulletin, Vol.51(1), pp.221-243
DOI: 10.1017/asb.2020.41
ISSN: 0515-0361
eISSN: 1783-1350
Publisher: CAMBRIDGE UNIV PRESS
Number of pages: 23
Grant note: DP200101859 / Australian Government through the Australian Research Council's Discovery Projects funding scheme Society of Actuaries (SOA) through a Centers of Actuarial Excellence (CAE) Research Grant (2018-2021) University of Iowa SOA James C. Hickman Scholar Program
Language: English
Date published: 01/01/2021
Academic Unit: Statistics and Actuarial Science
Record Identifier: 9984257622502771

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