Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5076262 | Insurance: Mathematics and Economics | 2016 | 6 Pages |
Abstract
Let X1,â¦,Xn be a set of n continuous and non-negative random variables, with log-concave joint density function f, faced by a person who seeks for an optimal deductible coverage for these n risks. Let d=(d1,â¦dn) and dâ=(d1â,â¦dnâ) be two vectors of deductibles such that dâ is majorized by d. It is shown that âi=1n(Xiâ§diâ) is larger than âi=1n(Xiâ§di) in stochastic dominance, provided f is exchangeable. As a result, the vector (âi=1ndi,0,â¦,0) is an optimal allocation that maximizes the expected utility of the policyholder's wealth. It is proven that the same result remains to hold in some situations if we drop the assumption that f is log-concave.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Sirous Fathi Manesh, Baha-Eldin Khaledi, Jan Dhaene,