Continuity and catastrophic risk

Catastrophic Risk Evaluation

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Catastrophic medical expenditure risk.

We propose a measure of household exposure to particularly onerous medical expenses. The measure can be decomposed into the probability that medical expenditure exceeds a threshold, the loss due to predictably low consumption of other goods if it does and the further loss arising from the volatility of medical expenses above the threshold. Depending on the choice of threshold, the measure is co...

Risk averse decision making under catastrophic risk

A nonstandard probabilistic setting for modeling of the risk of catastrophic events is presented. It allows random variables to take on infinitely large negative values with non-zero probability, which corresponds to catastrophic consequences unmeasurable in monetary terms, e.g. loss of human lives. Thanks to this extension, the safety-first principle is proved to be consistent with traditional...

Continuity and completeness under risk

Suppose somenon-degenerate preferencesR, with strict part P , over risky outcomes satisfy Independence. Then, when they satisfy any two of the following axioms, they satisfy the third. Herstein–Milnor: for all lotteries p, q, r , the set of a’s for which ap + (1 − a)qRr is closed. Archimedean: for all p, q, r there exists a > 0 such that if pPq, then ap + (1 − a)rPq. Complete: for all p, q, eit...

Catastrophic Risk Management and Economic Growth