A fixed point approach for computing actuarially fair Pareto optimal risk-sharing rules
Risk Management
2023-07-11 v2
Abstract
Risk-sharing is one way to pool risks without the need for a third party. To ensure the attractiveness of such a system, the rule should be accepted and understood by all participants. A desirable risk-sharing rule should fulfill actuarial fairness and Pareto optimality while being easy to compute. This paper establishes a one-to-one correspondence between an actuarially fair Pareto optimal (AFPO) risk-sharing rule and a fixed point of a specific function. A fast numerical method for computing these risk-sharing rules is also derived. As a result, we are able to compute AFPO risk-sharing rules for a large number of heterogeneous participants in this framework.
Cite
@article{arxiv.2303.05421,
title = {A fixed point approach for computing actuarially fair Pareto optimal risk-sharing rules},
author = {Fallou Niakh},
journal= {arXiv preprint arXiv:2303.05421},
year = {2023}
}