Related papers: Valuing insurance against small probability risks:…
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our…
We propose indifference pricing to estimate the value of the weak information. Our framework allows for tractability, quantifying the amount of additional information, and permits the description of the smallness and the stability with…
We discuss the coherence properties of Expected Shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the "average of the 100p % worst losses" in a sample of returns to a portfolio. Here p…
We seek to understand the probability an individual benefits from treatment (PIBT), an inestimable quantity that must be bounded in practice. Given the innate uncertainty in the population-level bounds on PIBT, we seek to better understand…
To choose between two discrete goods, a consumer pays attention to only those with prices below a threshold. From these, she chooses her most preferred good. We assume consumers in a population have the same preference but may have…
Probability Quantification (PQ) predictions of the efficacy of safety-critical protective systems is challenging. Yet, the popularity of PQ methodologies (e.g., Probabilistic Risk Assessment (PRA), Quantitative Risk Analysis (QRA) and…
We consider a model of socially interacting individuals that make a binary choice in a context of positive additive endogenous externalities. It encompasses as particular cases several models from the sociology and economics literature. We…
The rapid growth of e-commerce has made people accustomed to shopping online. Before making purchases on e-commerce websites, most consumers tend to rely on rating scores and review information to make purchase decisions. With this…
Considerations regarding clinical effectiveness and cost are essential in comparing the overall value of two treatments. There has been growing interest in methodology to integrate cost and effectiveness measures in order to inform policy…
We provide a new foundation of risk aversion by showing that this attitude is fully captured by the propensity to seize insurance opportunities. Our foundation, which applies to all probabilistically sophisticated preferences, well accords…
Random shifting typically appears in credibility models whereas random scaling is often encountered in stochastic models for claim sizes reflecting the time-value property of money. In this article we discuss some aspects of random shifting…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
Voluntary insurance contracts constitute a puzzle because they increase the expectation value of one party's wealth, whereas both parties must sign for such contracts to exist. Classically, the puzzle is resolved by introducing non-linear…
This study quantifies how contract duration influences buyers' willingness-to-pay (WTP) when they hold real options that allow them to flexibly time consumption in response to changing market conditions. Using contract data from the US…
We introduce a game-theoretic model to investigate the strategic interaction between a cyber insurance policyholder whose premium depends on her self-reported security level and an insurer with the power to audit the security level upon…
The distribution of health care payments to insurance plans has substantial consequences for social policy. Risk adjustment formulas predict spending in health insurance markets in order to provide fair benefits and health care coverage for…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
Strong empirical evidence from laboratory experiments, and more recently from population surveys, shows that individuals, when evaluating their situations, pay attention to whether they experience gains or losses, with losses weighing more…
Probability samples are the preferred method for providing inferences that are generalizable to a larger population. However, when a small (or rare) subpopulation is the group of interest, this approach is unlikely to yield a sample size…