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Moral-hazard-free insurance: mean-variance premium principle and rank-dependent utility

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 نشر من قبل Zuo Quan Xu Dr.
 تاريخ النشر 2021
  مجال البحث مالية
والبحث باللغة English
 تأليف Zuo Quan Xu




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This study exams a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility and the insurer employs the mean-variance premium principle. To eliminate some possible moral hazard issues, we only consider moral-hazard-free insurance contracts that obey the incentive compatibility constraint. The insurance problem is first formulated as a non-concave maximization problem involving Choquet expectation, then turned into a concave quantile optimization problem and finally solved by calculus of variations method. The optimal contract is expressed by a semi-linear second order double-obstacle ordinary differential equation with nonlocal operator. When the probability weighting function has a density, an effective numerical method is proposed to compute the optimal contract.



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