Article ID Journal Published Year Pages File Type
5077064 Insurance: Mathematics and Economics 2009 7 Pages PDF
Abstract
This article discusses the determination of risk capital based on “aversion” functions. Aversion functions weigh different outcomes according to perceived severity. Many practical and popular risk measures are usefully viewed in terms of aversion functions including those arising from distortion operators and risk margin loadings. The approach of this paper builds on, unifies, and extends existing disparate approaches discussed in the literature. Analytical and computer generated illustrations are given as well as suggestions for the practical determination of aversion functions.
Related Topics
Physical Sciences and Engineering Mathematics Statistics and Probability
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