Bounding basis risk using s-convex orders on Beta-unimodal distributions

Claude Lefèvre (), Stéphane Loisel and Pierre Montesinos ()
Additional contact information
Claude Lefèvre: ULB - Département de Mathématique [Bruxelles] - ULB - Faculté des Sciences [Bruxelles] - ULB - Université libre de Bruxelles
Pierre Montesinos: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

Working Papers from HAL

Abstract: This paper is concerned with properties of Beta-unimodal distributions and their use to assess the basis risk inherent to index-based insurance or reinsurance contracts. To this extent, we first characterize s-convex stochastic orders for Beta-unimodal distributions in terms of the Weyl fractional integral. We then determine s-convex extrema for such distributions , focusing in particular on the cases s = 2, 3, 4. Next, we define an Enterprise Risk Management framework that relies on Beta-unimodality to assess these hedge imperfections , introducing several penalty functions and worst case scenarios. Some of the results obtained are illustrated numerically via a representative catastrophe model.

Keywords: Risk management; Parametric index; Basis risk; Beta-unimodality; s-convex stochas- tic orders; s-convex extrema (search for similar items in EconPapers)
Date: 2020-05-18
New Economics Papers: this item is included in nep-ias and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-02611208v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://hal.science/hal-02611208v1/document (application/pdf)

Related works:
Working Paper: Bounding Basis-Risk Using s-convex Orders on Beta-unimodal Distributions (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02611208

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().