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

Xu GUO; Jingyuan LI; Dongri LIU; Jian Li WANG

doi:10.1016/j.insmatheco.2016.06.008

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 Publications › Journal Article (refereed) › peer-review

5 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 language	English
Pages (from-to)	144-149
Number of pages	6
Journal	Insurance: Mathematics and Economics
Volume	70
Early online date	22 Jun 2016
DOIs	https://doi.org/10.1016/j.insmatheco.2016.06.008
Publication status	Published - Sept 2016

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

Access to Document

10.1016/j.insmatheco.2016.06.008

Cite this

@article{2067a9201085422e9e9c92df8723cdc5,

title = "Preserving the Rothschild–Stiglitz type of increasing risk with background risk",

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.",

keywords = "Background risk, Comparison of risk, Expectation dependence, Increasing risk, Mean-preserving spread",

author = "Xu GUO and Jingyuan LI and Dongri LIU and WANG, {Jian Li}",

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.",

year = "2016",

month = sep,

doi = "10.1016/j.insmatheco.2016.06.008",

language = "English",

volume = "70",

pages = "144--149",

journal = "Insurance: Mathematics and Economics",

issn = "0167-6687",

publisher = "Elsevier",

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TY - JOUR

T1 - Preserving the Rothschild–Stiglitz type of increasing risk with background risk

AU - GUO, Xu

AU - LI, Jingyuan

AU - LIU, Dongri

AU - WANG, Jian Li

N1 - 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.

PY - 2016/9

Y1 - 2016/9

N2 - 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.

AB - 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.

KW - Background risk

KW - Comparison of risk

KW - Expectation dependence

KW - Increasing risk

KW - Mean-preserving spread

UR - http://commons.ln.edu.hk/sw_master/5418

UR - http://www.scopus.com/inward/record.url?scp=84977570390&partnerID=8YFLogxK

U2 - 10.1016/j.insmatheco.2016.06.008

DO - 10.1016/j.insmatheco.2016.06.008

M3 - Journal Article (refereed)

SN - 0167-6687

VL - 70

SP - 144

EP - 149

JO - Insurance: Mathematics and Economics

JF - Insurance: Mathematics and Economics

ER -

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

Abstract

Bibliographical note

Keywords

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Explain Two Puzzles in Macro-Finance by Higher-Order Risk Attitudes and Background Risks (運用高階風險規避和背景風險的方法研究兩個宏觀金融之謎)

Cite this

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

Abstract

Bibliographical note

Keywords

Access to Document

Other files and links

Fingerprint

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Explain Two Puzzles in Macro-Finance by Higher-Order Risk Attitudes and Background Risks (運用高階風險規避和背景風險的方法研究兩個宏觀金融之謎)

Cite this