Abstract
This paper considers a multiperiod economic equilibrium model to derive the economic premium principle of Bühlmann (1980, 1983). To do this, we construct a consumption/portfolio model in which each agent characterized by his/her utility function and endowments can invest his/her wealth into insurance market as well as financial market to maximize the expected, discounted total utility from consumption. The state price density in an equilibrium is obtained in terms of the Arrow-Pratt index of absolute risk aversion for the representative agent. As special cases, power and exponential utility functions are examined, and some comparative statics results are derived.
Volume
Toyko
Year
1999
Categories
Financial and Statistical Methods
Risk Pricing and Risk Evaluation Models
Utility Theory
Publications
ASTIN Colloquium
