Dynamic risk diversification and insurance premium principles

Details Dynamic risk diversification and insurance premium principles Dynamic risk diversification and insurance premium principles

2009-06-09

arxiv.org/abs/0906.1632v1

Mathematics

Probability

Scientific paper

We present an approach to the dynamic valuation of exposure risks in the multi-period setting, which incorporates a dynamic and multiple diversification of risks in Pareto optimal sense. This approach extends classical indifference premium principles and can be applied for the valuation of insurance risks. In particular, our method produces explicit computation formulas for the dynamic version of the exponential premium principles. Moreover, we show limit theorems asserting that the risk loading for our valuation decreases to zero when the number of divisions of a risk goes to infinity.

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