CHOQUET INSURANCE PRICING: A CAVEAT

Authors: Castagnoli E.; Maccheroni F.; Marinacci M.

Source: Mathematical Finance, Volume 14, Number 3, July 2004 , pp. 481-485(5)

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Abstract:

We show that, if prices in a market are Choquet expectations, the existence of one frictionless asset may force the whole market to be frictionless. Any risky asset will cause this collapse if prices depend only on the distribution with respect to a given nonatomic probability measure; the frictionless asset has to be fully revealing if such dependence is not assumed. Similar considerations apply to law-invariant coherent risk measures.

Keywords: Choquet integral; financial markets; insurance pricing; coherent risk measures

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.0960-1627.2004.00201.x

Publication date: 2004-07-01