Abstract
Mossin's theorem for deductible insurance given random initial wealth is re-examined. For a fair premium, it is shown that a necessary and sufficient condition, in the spirit of the Generalized Mossin Theorem for coinsurance, is impossible using the notion of expectation dependence. Next, it is established that for a fair premium, full insurance will be optimal for a risk-averse individual if the random loss and the random initial wealth are negative quadrant dependent, improving upon an extant result in the literature. In view of a set of examples given in this paper, such a sufficient condition cannot be obtained using the notion of expectation dependence. Finally, for an unfair premium, it is shown that partial insurance will always be optimal, irrespective of the risk preference of the individual as well as the dependence structure between the random loss and the random initial wealth.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.