Risk-insurance parity
Fuente:
arXiv
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| Auteurs principaux: | , , |
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| Format: | Preprint |
| Publié: |
2025
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| _version_ | 1866908703491358720 |
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| author | Côté, Benjamin Wang, Ruodu Wu, Qinyu |
| author_facet | Côté, Benjamin Wang, Ruodu Wu, Qinyu |
| contents | Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with different notions of risk aversion. We show that the classic notions -- both weak and strong -- of risk aversion can be characterized by propensity to different classes of insurance contracts, generalizing recent results on propensity to full, proportional, and deductible-limit contracts in the literature. We obtain full characterizations of the classes of insurance indemnity functions that correspond to weak and strong risk aversion. Risk-insurance parity allows us to define two new notions of risk aversion, between weak and strong, characterized by insurance propensity to deductible-only and limit-only contracts respectively. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_09208 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Risk-insurance parity Côté, Benjamin Wang, Ruodu Wu, Qinyu Theoretical Economics Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with different notions of risk aversion. We show that the classic notions -- both weak and strong -- of risk aversion can be characterized by propensity to different classes of insurance contracts, generalizing recent results on propensity to full, proportional, and deductible-limit contracts in the literature. We obtain full characterizations of the classes of insurance indemnity functions that correspond to weak and strong risk aversion. Risk-insurance parity allows us to define two new notions of risk aversion, between weak and strong, characterized by insurance propensity to deductible-only and limit-only contracts respectively. |
| title | Risk-insurance parity |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2512.09208 |