Asymptotic Analysis of Risk Premia Induced by Law-Invariant Risk Measures

Thomas Knispel, Roger Laeven and Gregor Svindland

Papers from arXiv.org

Abstract: We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility preferences. We show that the corresponding convergence rate is typically only $n^{1/2}$ instead of the conventional $n$, with $n$ the multiplicity of risks in the pool, depending upon the precise risk preferences.

Date: 2021-07
New Economics Papers: this item is included in nep-rmg and nep-upt
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