Fear of ruin
نویسندگان
چکیده
This paper offers interpretative properties of the “fear of ruin” coefficient u/u0 (Aumann and Kurz, 1977, Econometrica). This coefficient controls the behavior of expected utility maximizers towards the risk of losing their entire wealth. It is shown that this coefficient also captures risk-aversion motives in first-price auctions model. Equivalent comparative properties of “more fear of ruin” are derived. The partial ordering induced by the fear of ruin coefficient is shown to be weaker than that of Arrow-Pratt’s coefficient. ∗We thank Louis Eeckhoudt, Frédéric Jouneau and François Salanié for useful discussions. Corresponding author: Nicolas Treich. Address: Leerna-Inra, 21 all de Brienne, Manufacture des Tabacs, 31000 Toulouse, France. Email: [email protected]. Tel +33 5 61 12 85 14.
منابع مشابه
Fear of ruin and longevity enhancing investment
Rectangularization of the survival probability seems to be an ongoing process. It results from a higher concentration of the ages at death; but it can be reversed by a continuous increase in the limit of life time. In this paper, we assume that these two factors are endogenous and we show that risk averse decision makers exhibit a bias towards rectangularization. More specifically, the importan...
متن کاملOn The Moments Of The Time To Ruin Distribution When The Initial Reserve Is Large And Claim Amount Distribution Is Two Stage Hypo Exponential Distribution
In any classical risk model one of the important random variable is time to ruin. As time to ruin warns the management for possible adverse situations that may arise, the distribution of time to ruin place a vital role in the day to day transactions of the any insurance company. Moments of the distribution are also important as coefficient of skewness of the distribution is very important in ac...
متن کاملAsymptotics for the infinite time ruin probability of a dependent risk model with a constant interest rate and dominatedly varying-tailed claim sizes
This paper mainly considers a nonstandard risk model with a constant interest rate, where both the claim sizes and the inter-arrival times follow some certain dependence structures. When the claim sizes are dominatedly varying-tailed, asymptotics for the infinite time ruin probability of the above dependent risk model have been given.
متن کاملOptimal asset control of the diffusion model under consideration of the time value of ruin
In this paper, we consider the optimal asset control of a financial company which can control its liquid reserves by paying dividends and by issuing new equity. We assume that the liquid surplus of the company in the absence of control is modeled by the diffusion model. It is a hot topic to maximize the expected present value of dividends payout minus equity issuance until the time of ba...
متن کاملOn the Time Value of Absolute Ruin with Debit Interest
Assume that the surplus of an insurer follows a compound Poisson surplus process. When the surplus is below zero or the insurer is on deficit, the insurer could borrow money at a debit interest rate to pay claims. Meanwhile, the insurer will repay debts from her premium income. The negative surplus may return to a positive level if debts are reasonable. However, when the negative surplus is bel...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2003