Buhlmann’s Economic Premium Principle in The Presence of Transaction Costs

Masaaki Kijima () and Akihisa Tamura ()
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Masaaki Kijima: Graduate School of Social Sciences, Tokyo Metropolitan University
Akihisa Tamura: Department of Mathematics, Keio University

No 893, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper examines the B¨uhlmann’s equilibrium pricing model (1980) in the presence of transaction cost and derives the (multivariate) Esscher transform within the framework under some assumptions. The result reveals that the Esscher transform is an appropriate probability transform for the pricing of insurance risks even in the market with transaction costs.

Keywords: Equilibrium pricing; Equilibrium allocation; Incomplete market; Esscher transform; Transaction cost (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-ger
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