Determination of risk pricing measures from market prices of risk

Henryk Gzyl () and Silvia Mayoral

Insurance: Mathematics and Economics, 2008, vol. 43, issue 3, 437-443

Abstract: A new insurance provider or a regulatory agency may be interested in determining a risk measure consistent with observed market prices of a collection of risks. Using a relationship between distorted coherent risk measures and spectral risk measures, we provide a method for reconstructing distortion functions from the observed prices of risk. The technique is based on an appropriate application of the method of maximum entropy in the mean, which builds upon the classical method of maximum entropy.

Keywords: Distortion; function; Spectral; measures; Risk; aversion; function; Maximum; entropy; in; the; mean; Inverse; problems (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:43:y:2008:i:3:p:437-443

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