Systemic optimal risk transfer equilibrium
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Publication:829331
DOI10.1007/S11579-020-00277-8zbMATH Open1461.91337arXiv1907.04257OpenAlexW3121569019MaRDI QIDQ829331FDOQ829331
Authors: Francesca Biagini, Alessandro Doldi, Jean-Pierre Fouque, Marco Frittelli, Thilo Meyer-Brandis 
Publication date: 5 May 2021
Published in: Mathematics and Financial Economics (Search for Journal in Brave)
Abstract: We propose a novel concept of a Systemic Optimal Risk Transfer Equilibrium (SORTE), which is inspired by the B"uhlmann's classical notion of an Equilibrium Risk Exchange. We provide sufficient general assumptions that guarantee existence, uniqueness, and Pareto optimality of such a SORTE. In both the B"uhlmann and the SORTE definition, each agent is behaving rationally by maximizing his/her expected utility given a budget constraint. The two approaches differ by the budget constraints. In B"uhlmann's definition the vector that assigns the budget constraint is given a priori. On the contrary, in the SORTE approach, the vector that assigns the budget constraint is endogenously determined by solving a systemic utility maximization. SORTE gives priority to the systemic aspects of the problem, in order to optimize the overall systemic performance, rather than to individual rationality.
Full work available at URL: https://arxiv.org/abs/1907.04257
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