2021/07/06 by Xiaoqing Liang, Ruodu Wang, Liang, Xiaoqing +3
Decision Sciences · Economics, Econometrics and Finance · #60E15 #91G05 #FOS: Economics and business #Insurance and Financial Risk Management #Law, Economics, and Judicial Systems #Risk Management (q-fin.RM) #Risk and Portfolio Optimization #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2107.02656
openalex publication_date 2021/07/06 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
In this paper, we study an optimal insurance problem for a risk-averse individual who seeks to maximize the rank-dependent expected utility (RDEU) of her terminal wealth, and insurance is priced via a general distortion-deviation premium principle. We prove necessary and sufficient conditions satisfied by the optimal solution and consider three ambiguity orders to further determine the optimal indemnity. Finally, we analyze examples under three distortion-deviation premium principles to explore the specific conditions under which no insurance or deductible insurance is optimal.