Insurance and Asset Pricing in Incomplete Markets With Heavy Tailed Risks

Topics:
Insurance
Tags:
Asset,
Strategy,
Risk,
Pricing Strategy,
Pricing,
Operational Planning,
Marketing Research,
Marketing,
Management,
Insurance,
...
Source:
University of New South Wales

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Overview: A model for pricing risks in incomplete markets using prices for traded assets and allowing for heavy tailed risks is developed. The approach used is based on an approximation that collapses to the CAPM for multi normal portfolios. The pricing result is derived as an approximation using elliptical distributions and a modification of previously developed incomplete markets insurance pricing result based on the Esscher transform. The result allows relative pricing of a portfolio of insurance or asset risks compared to a traded portfolio of risks.

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Format: PDF | Size: 181KB | Date: May 2004 | Pages: 17

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