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Insurance Premia Consistent with the Market

Erio Castagnoli (), Fabio Maccheroni and Massimo Marinacci

ICER Working Papers - Applied Mathematics Series from ICER - International Centre for Economic Research

Abstract: We consider insurance prices in presence of an incomplete and competitive market. We show that if the insurance price system is internal, sublinear, and consistent with the market, then insurance prices are the maxima of their expected payments with respect to a family of risk neutral probabilities. We also show that under a simple additional assumption it is possible to decompose the obtained price in net premium plus safety loading.

Pages: 26 pages
Date: 2002-05
New Economics Papers: this item is included in nep-ias
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