Abstract
This paper considers a multiperiod economic equilibrium model for deriving the economic premium principle of Bühlmann [Astin Bull. 11 (1980) 52–60; Astin Bull. 14 (1983) 13–21]. To do this, we construct a consumption/portfolio model in which each agent is characterized by his/her utility function and income and seeks to invest his/her wealth in both insurance as well as a financial market so as to maximize the expected, discounted total utility from consumption. The state price density in equilibrium is obtained in terms of the Arrow–Pratt index of absolute risk aversion for the representative agent. As special cases, power and exponential utility functions are examined, and some comparative statics results are derived.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: 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.
