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Keywords:

dependency, correlation order, comonotonicity, stop-loss premium, premium principle, transforms, choice, risk, Social Sciences, Science & Technology, Physical Sciences, Economics, Mathematics, Interdisciplinary Applications, Social Sciences, Mathematical Methods, Statistics & Probability, Business & Economics, Mathematics, Mathematical Methods In Social Sciences, TRANSFORMS, CHOICE, RISK, 01 Mathematical Sciences, 14 Economics, 15 Commerce, Management, Tourism and Services, 35 Commerce, management, tourism and services, 38 Economics, 49 Mathematical sciences

Abstract:

In this paper, we investigate the notion of dependency between risks and its effect on the related stop-loss premiums. The concept of comonotonicity, being an extreme case of dependency, is discussed in detail. For the bivariate case, it is shown that, given the distributions of the individual risks, comonotonicity leads to maximal stop-loss premiums. Some properties of stop-loss preserving premium principles are considered. A simple proof is given for the sub-additivity property of Wang's premium principle. (C) 1998 Elsevier Science B.V.