Loss reserving using loss aversion functions

Weihao Choo and Piet de Jong

Insurance: Mathematics and Economics, 2009, vol. 45, issue 2, 271-277

Abstract: This article discusses the determination of risk capital based on "aversion" functions. Aversion functions weigh different outcomes according to perceived severity. Many practical and popular risk measures are usefully viewed in terms of aversion functions including those arising from distortion operators and risk margin loadings. The approach of this paper builds on, unifies, and extends existing disparate approaches discussed in the literature. Analytical and computer generated illustrations are given as well as suggestions for the practical determination of aversion functions.

Keywords: Distortion; operators; Loss; aversion; Risk; measure; Percentile; rank; aversion; Standard; deviation; principle; Premium; loading; Expected; Maximum; Loss (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:45:y:2009:i:2:p:271-277

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