2023/03/09 by Fallou Niakh, Niakh, Fallou · 1 citation
Agricultural and Biological Sciences · Decision Sciences · Economics, Econometrics and Finance · #Agricultural risk and resilience #FOS: Economics and business #Risk Management (q-fin.RM) #Risk and Portfolio Optimization #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2303.05421
openalex publication_date 2023/03/09 · openalex created_date 2023/03/12 · openalex updated_date 2026/07/28
Risk-sharing is one way to pool risks without the need for a third party. To ensure the attractiveness of such a system, the rule should be accepted and understood by all participants. A desirable risk-sharing rule should fulfill actuarial fairness and Pareto optimality while being easy to compute. This paper establishes a one-to-one correspondence between an actuarially fair Pareto optimal (AFPO) risk-sharing rule and a fixed point of a specific function. A fast numerical method for computing these risk-sharing rules is also derived. As a result, we are able to compute AFPO risk-sharing rules for a large number of heterogeneous participants in this framework.