Borch's theorem from the perspective of comonotonicity (Q2015483): Difference between revisions
From MaRDI portal
Changed an Item |
Set profile property. |
||
Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
Normal rank |
Revision as of 06:32, 5 March 2024
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | Borch's theorem from the perspective of comonotonicity |
scientific article |
Statements
Borch's theorem from the perspective of comonotonicity (English)
0 references
23 June 2014
0 references
The paper deals with Borch's theorem on the characterization of Pareto optimal risk exchange treaties under the expected utility paradigm (in the framework of risk allocation the Pareto optimality means that it is impossible to improve the wellbeing of one trader without worsening the wellbeing of at least one other trader). Instead of optimizing by means of the traditional Lagrangian method or variational arguments the paper proposes a new method based on a Breeden-Litzenberger integral representation formula which allows to rewrite the objective function into a sum of mixtures of stop-loss transforms of the risk allocations. Moreover, this sum can be optimized applying the theory of comonotonicity. This approach enables e.g. to derive a closed-form expression for the given problem including the classical Borch's theorem and other interesting results.
0 references
Borch's theorem
0 references
comonotonicity
0 references
expected utility paradigm
0 references
optimal risk exchange
0 references
Pareto optimality
0 references