Related papers: Risk exchange under infinite-mean Pareto models
We study stochastic dominance between portfolios of independent and identically distributed (iid) extremely heavy-tailed (i.e., infinite-mean) Pareto random variables. With the notion of majorization order, we show that a more diversified…
We study optimal risk sharing among $n$ agents endowed with distortion risk measures. Our model includes market frictions that can either represent linear transaction costs or risk premia charged by a clearing house for the agents. Risk…
We model the influence of sharing large exogeneous losses to the reinsurance market by a bipartite graph. Using Pareto-tailed claims and multivariate regular variation we obtain asymptotic results for the Value-at-Risk and the Conditional…
In risk-sharing markets with aggregate uncertainty, characterizing Pareto-optimal allocations when agents might not be risk averse is a challenging task, and the literature has only provided limited explicit results thus far. In particular,…
The basic principle of any version of insurance is the paradigm that exchanging risk by sharing it in a pool is beneficial for the participants. In case of independent risks with a finite mean this is the case for risk averse decision…
We study Pareto optimality in a decentralized peer-to-peer risk-sharing market where agents' preferences are represented by robust distortion risk measures that are not necessarily convex. We obtain a characterization of Pareto-optimal…
We investigate a market without money in which agents can offer certain goods (or multiple copies of an agent-specific good) in exchange for goods of other agents. The exchange must be balanced in the sense that each agent should receive a…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
We study risk sharing among agents with preferences modeled by heterogeneous distortion risk measures, who are not necessarily risk averse. Pareto optimality for agents using risk measures is often studied through the lens of…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
We introduce a statistical model for operational losses based on heavy-tailed distributions and bipartite graphs, which captures the event type and business line structure of operational risk data. The model explicitly takes into account…
The emph{securities market} is the fundamental theoretical framework in economics and finance for resource allocation under uncertainty. Securities serve both to reallocate risk and to disseminate probabilistic information. emph{Complete}…
We study efficient risk sharing among risk-averse agents in an economy with a large, finite number of states. Following a random shock to an initial agreement, agents may renegotiate. If they require a minimal utility improvement to accept…
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.…
The upper tail of a claim size distribution of a property line of business is frequently modelled by Pareto distribution. However, the upper tail does not need to be Pareto distributed, extraordinary shapes are possible. Here, the…
When modeling a vector of risk variables, extreme scenarios are often of special interest. The peaks-over-thresholds method hinges on the notion that, asymptotically, the excesses over a vector of high thresholds follow a multivariate…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
We introduce a new class of heavy-tailed distributions for which any weighted average of independent and identically distributed random variables is larger than one such random variable in (usual) stochastic order. We show that many…