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Mean-Value Principle under Cumulative Prospect Theory

Published online by Cambridge University Press:  09 August 2013

Marek Kaluszka  and
Michał Krzeszowiec
Marek Kaluszka
Affiliation:
Institute of Mathematics, Łódź University of Technology, Ul. Wólczańska 215, 90-924 Łódź, Poland, E-mail: kaluszka@p.lodz.pl
Michał Krzeszowiec
Affiliation:
Institute of Mathematics, Łódź University of Technology, Ul. Wólczańska 215, 90-924 Łódź, Poland, E-mail: kaluszka@p.lodz.pl Institute of Mathematics, Polish Academy of Sciences, Śniadeckich 8, P.O. Box 21, 00-956 Warszawa, Poland, E-mail: michalkrzeszowiec@gmail.com
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Abstract

In the paper we introduce a generalization of the mean-value principle under Cumulative Prospect Theory. This new method involves some well-known ways of pricing insurance contracts described in the actuarial literature. Properties of this premium principle, such as translation and scale invariance, additivity for independent risks, risk loading and others are studied.

Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 42 , Issue 1 , May 2012 , pp. 103 - 122
Copyright
Copyright © International Actuarial Association 2012

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