Related papers: Risk Aversion and Insurance Propensity
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We…
Bernard et al. (2015) study an optimal insurance design problem where an individual's preference is of the rank-dependent utility (RDU) type, and show that in general an optimal contract covers both large and small losses. However, their…
Agents' learning from feedback shapes economic outcomes, and many economic decision-makers today employ learning algorithms to make consequential choices. This note shows that a widely used learning algorithm, $\varepsilon$-Greedy, exhibits…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
Probabilistic risk aversion, defined through quasi-convexity in probabilistic mixtures, is a common useful property in decision analysis. We study a general class of non-monotone mappings, called the generalized rank-dependent functions,…
We consider the problem of optimal risk sharing in a pool of cooperative agents. We analyze the asymptotic behavior of the certainty equivalents and risk premia associated with the Pareto optimal risk sharing contract as the pool expands.…
We show that under plausible levels of background risk, no theory of choice under risk -- such as expected utility theory, prospect theory, or rank dependent utility -- can simultaneously satisfy the following three economic postulates: (i)…
In this paper, we address the identification and estimation of insurance models where insurees have private information about their risk and risk aversion. The model includes random damages and allows for several claims, while insurers…
We present an historical overview about the connections between the analysis of risk and the control of autonomous systems. We offer two main contributions. Our first contribution is to propose three overlapping paradigms to classify the…
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…
In high-risk environments, traditional indemnity insurance is often unaffordable or ineffective, despite its well-known optimality under expected utility. We compare excess-of-loss indemnity insurance with parametric insurance within a…
At the core of insurance business lies classification between risky and non-risky insureds, actuarial fairness meaning that risky insureds should contribute more and pay a higher premium than non-risky or less-risky ones. Actuaries,…
The attributable risk, often called the population attributable risk, is in many epidemiological contexts a more relevant measure of exposure-disease association than the excess risk, relative risk, or odds ratio. When estimating…
To find a trade-off between profitability and prudence, financial practitioners need to choose appropriate risk measures. Two key points are: Firstly, investors' risk attitudes under uncertainty conditions should be an important reference…
When conducting inference on partially identified parameters, confidence regions may cover the whole identified set with a prescribed probability, to which we will refer as set coverage, or they may cover each of its point with a prescribed…
We introduce new methods of analysing time to event data via extended versions of the proportional hazards and accelerated failure time (AFT) models. In many time to event studies, the time of first observation is arbitrary, in the sense…
Prentice & Pyke (1979) established that the maximum likelihood estimate of an odds-ratio in a case-control study is the same as would be found by running a logistic regression: in other words, for this specific target the incorrect…
How should a risk-averse newsvendor order optimally under distributional ambiguity? Attempts to extend Scarf's celebrated distribution-free ordering rule using risk measures have led to conflicting prescriptions: CVaR-based models…
In the hypothesis of rare loss events, the general expression of the policy value has been determined as a functional of the "expected frequency / loss severity" function and of the retention function. Exponential disutility has been chosen…
There is an extensive literature in social choice theory studying the consequences of weakening the assumptions of Arrow's Impossibility Theorem. Much of this literature suggests that there is no escape from Arrow-style impossibility…