On Optimal Reinsurance Policy with Distortion Risk Measures and Premiums

Hirbod Assa

Papers from arXiv.org

Abstract: In this paper, we consider the problem of optimal reinsurance design, when the risk is measured by a distortion risk measure and the premium is given by a distortion risk premium. First, we show how the optimal reinsurance design for the ceding company, the reinsurance company and the social planner can be formulated in the same way. Second, by introducing the marginal indemnification functions, we characterize the optimal reinsurance contracts. We show that, for an optimal policy, the associated marginal indemnification function only takes the values zero and one. We will see how the roles of the market preferences and premiums and that of the total risk are separated.

Date: 2014-06
New Economics Papers: this item is included in nep-rmg
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