Optimal insurance under multiple sources of risk with positive dependence

ZhiYi Lu, LePing Liu, JianYu Zhang and LiLi Meng

Insurance: Mathematics and Economics, 2012, vol. 51, issue 2, 462-471

Abstract: In this paper we try to derive an optimal insurance treaty when the insured faces multiple sources of risk. We show that the deductible insurance is optimal when the insurable and uninsurable risks are positively dependent or independent within the expected utility framework. A necessary condition of optimal deductible is given under some mild conditions. We compare our model with the classical one without background risk. Furthermore, the shifts of optimal deductible and expected utility by modifications of the dependence structure and the marginal are analyzed.

Keywords: Optimal insurance; Uninsurable risks; Positive dependence; Deductible insurance; Expectation premium principle (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167668712000789
Full text for ScienceDirect subscribers only

Related works:
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:eee:insuma:v:51:y:2012:i:2:p:462-471

DOI: 10.1016/j.insmatheco.2012.06.011

Access Statistics for this article

Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu

More articles in Insurance: Mathematics and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().