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- Publisher Website: 10.1016/j.ejor.2022.08.003
- Scopus: eid_2-s2.0-85136255761
- WOS: WOS:000949818500001
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Article: Bowley vs. Pareto optima in reinsurance contracting
Title | Bowley vs. Pareto optima in reinsurance contracting |
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Authors | |
Keywords | Bowley optimality Convex risk measures Optimal reinsurance Pareto optimality Risk management |
Issue Date | 2023 |
Citation | European Journal of Operational Research, 2023, v. 307, n. 1, p. 382-391 How to Cite? |
Abstract | The notion of a Bowley optimum has gained recent popularity as an equilibrium concept in problems of risk sharing and optimal reinsurance. In this paper, we examine the relationship between Bowley optimality and Pareto efficiency in a problem of optimal reinsurance, under fairly general preferences. Specifically, we show that Bowley-optimal contracts are indeed Pareto efficient but they make the insurer indifferent with the status quo (hence providing a partial first welfare theorem). Moreover, we show that only those Pareto-efficient contracts that make the insurer indifferent between suffering the loss and entering into the reinsurance contract are Bowley optimal (hence providing a partial second welfare theorem). We interpret these result as indicative of the limitations of Bowley optimality as an equilibrium concept in this literature. We also discuss relationships with competitive equilibria, and we provide illustrative examples. |
Persistent Identifier | http://hdl.handle.net/10722/328836 |
ISSN | 2023 Impact Factor: 6.0 2023 SCImago Journal Rankings: 2.321 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Boonen, Tim J. | - |
dc.contributor.author | Ghossoub, Mario | - |
dc.date.accessioned | 2023-07-22T06:24:29Z | - |
dc.date.available | 2023-07-22T06:24:29Z | - |
dc.date.issued | 2023 | - |
dc.identifier.citation | European Journal of Operational Research, 2023, v. 307, n. 1, p. 382-391 | - |
dc.identifier.issn | 0377-2217 | - |
dc.identifier.uri | http://hdl.handle.net/10722/328836 | - |
dc.description.abstract | The notion of a Bowley optimum has gained recent popularity as an equilibrium concept in problems of risk sharing and optimal reinsurance. In this paper, we examine the relationship between Bowley optimality and Pareto efficiency in a problem of optimal reinsurance, under fairly general preferences. Specifically, we show that Bowley-optimal contracts are indeed Pareto efficient but they make the insurer indifferent with the status quo (hence providing a partial first welfare theorem). Moreover, we show that only those Pareto-efficient contracts that make the insurer indifferent between suffering the loss and entering into the reinsurance contract are Bowley optimal (hence providing a partial second welfare theorem). We interpret these result as indicative of the limitations of Bowley optimality as an equilibrium concept in this literature. We also discuss relationships with competitive equilibria, and we provide illustrative examples. | - |
dc.language | eng | - |
dc.relation.ispartof | European Journal of Operational Research | - |
dc.subject | Bowley optimality | - |
dc.subject | Convex risk measures | - |
dc.subject | Optimal reinsurance | - |
dc.subject | Pareto optimality | - |
dc.subject | Risk management | - |
dc.title | Bowley vs. Pareto optima in reinsurance contracting | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/j.ejor.2022.08.003 | - |
dc.identifier.scopus | eid_2-s2.0-85136255761 | - |
dc.identifier.volume | 307 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 382 | - |
dc.identifier.epage | 391 | - |
dc.identifier.isi | WOS:000949818500001 | - |