On Pareto-Optimal Reinsurance with Constraints Under Distortion Risk Measures

2017 ◽  
Author(s):  
Wenjun Jiang ◽  
Hanping Hong
Keyword(s):  
Risk Measures ◽  
Pareto Optimal ◽  
Optimal Reinsurance ◽  
Distortion Risk Measures

OPTIMAL REINSURANCE DESIGN WITH DISTORTION RISK MEASURES AND ASYMMETRIC INFORMATION

2021 ◽  
pp. 1-23
Author(s):  
Tim J. Boonen ◽  
Yiying Zhang
Keyword(s):  
At Risk ◽  
Asymmetric Information ◽  
Value At Risk ◽  
Functional Form ◽  
Risk Measures ◽  
Risk Measure ◽  
Incentive Compatibility ◽  
Optimal Reinsurance ◽  
Net Profit ◽  
Distortion Risk Measures

ABSTRACT This paper studies a problem of optimal reinsurance design under asymmetric information. The insurer adopts distortion risk measures to quantify his/her risk position, and the reinsurer does not know the functional form of this distortion risk measure. The risk-neutral reinsurer maximizes his/her net profit subject to individual rationality and incentive compatibility constraints. The optimal reinsurance menu is succinctly derived under the assumption that one type of insurer has a larger willingness to pay than the other type of insurer for every risk. Some comparative analyses are given as illustrations when the insurer adopts the value at risk or the tail value at risk as preferences.

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