Pricing risk when distributions are fat tailed

Journal of Applied Probability

Volumn 41A, Issue , 2004, Pages 157-175

  Gay, Roger ^a  

^a MONASH UNIVERSITY   (Australia)

Author keywords

Insurance; Risk theory

Indexed keywords

EID: 33845785968     PISSN: 00219002     EISSN: None     Source Type: Journal    
DOI: 10.1239/jap/1082552197     Document Type: Article

References (24)

1. Albrecht, P. (1992). Premium calculation without arbitrage. ASTIN Bull. 22, 247-256.
2. Arrow, K. J. (1971). The theory of risk aversion. In Essays on the Theory of Risk Bearing, Markham, Chicago, pp. 90-120.
3. Bladt, M. and Rydberg, T. V (1998). An actuarial approach to option pricing under the physical measure without market assumptions. Insurance Math. Econom. 22, 65-73.
4. Bowers, N. et al. (1986). Actuarial Mathematics. Society ofActuaries, Itasca, IL.
5. Camerer, C. F. (1989). An experimental test on several generalized utility theories. J. Risk Uncertainty 2, 61-104.
6. Feller, W. (1968). An Introduction to Probability Theory and Its Applications, Vol. 1, 3rd edn. JohnWiley, NewYork.
7. Fishburn, P. C. (1988). Nonlinear Preference and Utility Theory. Johns Hopkins University Press, Baltimore, MD.
8. Friedman, M. and Savage, L. J. (1948). The utility analysis of choices involving risks. J. Political Economy 56, 279-304.
9. Gopikrishnan, P. et al. (1999). Scaling of the distribution of price fluctuations of financial market indices. Phys. Rev. E 60, 5305-5316.
10. Heyde, C. C. and Gay, R. (2003). Fractals in finance and insurance. Preprint.
11. Heyde, C. C., Liu, S. and Gay, R. (2001). Fractal scaling and Black-Scholes: the full story. J. Securities Inst. Austral. 1, 29-32.
12. Hogarth, R. and Einhorn, H. (1990). Venture theory: a model of decision weights. Manag. Sci. 36, 780-803.
13. Hogg, R. V. and Klugman, S. A. (1984). Loss Distributions. John Wiley, New York.
14. Loomes, G. and Sugden, R. (1987). Regrettheory: analternativetheory ofrational choiceunderuncertainty. J. Econom. Theory 92, 805-824.
15. Loretan, M. and Phillips, P. C. B. (1994). Testing covariance stationarity of heavy tailed time series. J. Empirical Finance 1, 211-248.
16. Machina, M. J. (1987). Choice under uncertainty: problems solved and unsolved. Econom. Perspectives 1, 121-154.
17. Muller, U. A., Dacorogna, M. M., Olsen, R. B. and Pictet, O. V. (1998). Heavy tails in high frequency financial data. In A Practical Guide to Heavy Tails: Statistical Techniques and Applications, eds R. J. Adler, R. E. Feldman and M. S. Taqqu, Birkhäuser, Boston, MA.
18. Plerou, V. et al. (1999). Scaling of the distribution of price fluctuations of individual companies. Phys. Rev. E 60, 6519-6529.
19. Quiggin, J. (1982). A theory of anticipated utility. J. Econom. Behaviour 3, 323-343.
20. Rolski, T., Schmidli, H., Schmidt, V. and Teugels, J. (1999). Stochastic Processes for Insurance and Finance. John Wiley, Chichester.
21. Schmiedler, D. (1989). Subjective probability and expected utility without additivity. Econometrica 57, 571-587.
22. Tversky, A. and Kahneman, D. (1979). Prospect theory: an analysis of decision under uncertainty. Econometrica 47, 263-291.
23. Tversky, A. and Kahneman, D. (1992). Advances in prospect theory; cumulative representation of uncertainty. J. Risk Uncertainty 5, 297-323.
24. Von Neumann, J. and Morgenstern, O. (1947). Theory of Games and Economic Behaviour. Princeton University Press.