Researchers from University of Amsterdam Report Recent Findings in Actuarial Science (Risk Sharing With Expected And Dual Utilities)

Insurance Weekly News

By a News Reporter-Staff News Editor at Insurance Weekly News -- New research on Science - Actuarial Science is the subject of a report. According to news originating from Amsterdam, Netherlands, by VerticalNews editors, the research stated, "This paper analyzes optimal risk sharing among agents that are endowed with either expected utility preferences or with dual utility preferences. We find that Pareto optimal risk redistributions and the competitive equilibria can be obtained via bargaining with a hypothetical representative agent of expected utility maximizers and a hypothetical representative agent of dual utility maximizers."

Our news journalists obtained a quote from the research from the University of Amsterdam, "The representative agent of expected utility maximizers resembles an average risk-averse agent, whereas representative agent of dual utility maximizers resembles an agent that has lowest aversion to mean-preserving spreads. This bargaining leads to an allocation of the aggregate risk to both groups of agents. The optimal contract for the expected utility maximizers is proportional to their allocated risk, and the optimal contract for the dual utility maximizing agents is given by 'tranching' of their allocated risk. We show a method to derive equilibrium prices. We identify a condition under which prices are locally independent of the expected utility functions, and given in closed form."

According to the news editors, the research concluded: "Moreover, we characterize uniqueness of the competitive equilibrium."

For more information on this research see: Risk Sharing With Expected And Dual Utilities. Astin Bulletin, 2017;47(2):391-415. Astin Bulletin can be contacted at: Cambridge Univ Press, Edinburgh Bldg, Shaftesbury Rd, CB2 8RU Cambridge, England.

The news correspondents report that additional information may be obtained from T.J. Boonen, University of Amsterdam, Amsterdam Sch Econ, NL-1018 WB Amsterdam, Netherlands.