Stochastic Dominance and Conditional Expectation—An Insurance Theoretical Approach

Anders Borglin and Hans Keiding
Additional contact information
Anders Borglin: Economics Department, University of Lund, Ekonomicentrum, Tycho Brakes vag 1, S-22007 Lund, Sweden, e-mail: anders.borglin@nek.iu.se
Hans Keiding: Institute of Economics, University of Copenhagen, Studie Straede 6, DK-1456, Copenhagen K, Denmark, e-mail: Hans.Keiding@econ.ku.dk

The Geneva Risk and Insurance Review, 2002, vol. 27, issue 1, 48 pages

Abstract: We show that the relation of second order stochastic dominance, which has found widespread use in models of economic behavior under uncertainty, may be described in terms of conditional expectation. If a distribution G second order stochastically dominates another distribution F, then there are random variables g and f with distributions G and F, respectively, such that g can be obtained from f by iterated conditional expectation. In terms of insurance, this shows that the less risky distribution can be obtained by a sequence of insurance contracts each one insuring against the residual risk left over from the previous contracts. The Geneva Papers on Risk and Insurance Theory (2002) 27, 31–48. doi:10.1023/A:1020629424238

Date: 2002
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v27/n1/pdf/grir2002143a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v27/n1/full/grir2002143a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

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:pal:genrir:v:27:y:2002:i:1:p:31-48

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().