Preserving the Rothschild–Stiglitz type of increasing risk with background risk

Xu GUO, Jingyuan LI*, Dongri LIU, Jian Li WANG

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

2 Citations (Scopus)

Abstract

Background risk refers to a risk that is exogenous and is not subject to transformations by a decision-maker. In this paper, we extend the definition of the Rothschild–Stiglitz type of increasing risk to a background risk framework. We theoretically investigate a more general definition of increase in risk in the presence of background risk. The results suggest that an extended concept of expectation dependence plays a vital role.
Original languageEnglish
Pages (from-to)144-149
Number of pages6
JournalInsurance: Mathematics and Economics
Volume70
Early online date22 Jun 2016
DOIs
Publication statusPublished - Sep 2016

Fingerprint

Increasing risk
Background risk
Background
Decision maker
Increase in risk
Framework
Concepts

Bibliographical note

The research described here was supported by the Natural Science Foundation of Jiangsu Province, China, Grant No. BK20150732; the National Natural Science Foundation of China with Grant No. 71401074; General Research Fund of the Hong Kong Research Grants Council under Research Project No. LU13500814; the Faculty Research Grant of Lingnan University under Research Project No. DB15A2 and No. DB16A1.

Keywords

  • Background risk
  • Comparison of risk
  • Expectation dependence
  • Increasing risk
  • Mean-preserving spread

Cite this

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abstract = "Background risk refers to a risk that is exogenous and is not subject to transformations by a decision-maker. In this paper, we extend the definition of the Rothschild–Stiglitz type of increasing risk to a background risk framework. We theoretically investigate a more general definition of increase in risk in the presence of background risk. The results suggest that an extended concept of expectation dependence plays a vital role.",
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Preserving the Rothschild–Stiglitz type of increasing risk with background risk. / GUO, Xu; LI, Jingyuan; LIU, Dongri; WANG, Jian Li.

In: Insurance: Mathematics and Economics, Vol. 70, 09.2016, p. 144-149.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AU - LIU, Dongri

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