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Equilibrium Pricing Transforms: New Results Using Buhlmann’s 1980 Economic Model*

Published online by Cambridge University Press:  17 April 2015

Shaun S. Wang
Shaun S. Wang*
Affiliation:
SCOR Reinsurance Company, One Pierce Place, Suite 600, P.O. Box 4049, Itasca, IL 60143-4049 USA, swang@scor.com
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Abstract

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In this paper we revisit an economic model of Buhlmann (ASTIN Bulletin, 1980) and derive equilibrium pricing transforms. We obtain the Esscher Transform and the Wang Transform under different sets of assumptions on the aggregate economic environment. We show that the Esscher Transform and the Wang Transform exhibit very different behaviors when used in pricing insurance risks.

Keywords

Equilibrium PricingEsscher TransformWang TransformDistorted ProbabilityExponential TiltingOptimal Exchange
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 33 , Issue 1 , May 2003 , pp. 57 - 73
Copyright
Copyright © ASTIN Bulletin 2003

Footnotes

*

This paper is dedicated to Dr. Hans Buhlmann for his tremendous contributions to the actuarial profession and the international actuarial community.

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