Axiomatic characterization of insurance prices. (English) Zbl 0959.62099

Summary: We take an axiomatic approach to characterize insurance prices in a competitive market setting. We present four axioms to describe the behavior of market insurance prices. From these axioms it follows that the price of an insurance risk has a Choquet integral representation with respect to a distorted probability [M.E. Yaari, Econometrica 55, 95–115 (1987; Zbl 0616.90005)]. We propose an additional axiom for reducing compound risks. This axiom determines that the distortion function is a power function.


62P05 Applications of statistics to actuarial sciences and financial mathematics
91B30 Risk theory, insurance (MSC2010)


Zbl 0616.90005
Full Text: DOI


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