Capital-Allocation-Induced Risk Sharing
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arXiv
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| Hauptverfasser: | , , |
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| Format: | Preprint |
| Veröffentlicht: |
2026
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| _version_ | 1866910078629576704 |
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| author | Chong, Wing Fung Feng, Runhuan Ng, Kenneth Tsz Hin |
| author_facet | Chong, Wing Fung Feng, Runhuan Ng, Kenneth Tsz Hin |
| contents | This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a corporation based on the relationship among the individual risks, often also through the aggregate risk, the latter is an arrangement which collects risks from and allocates them to, also ex-ante, a group of participants. Drawing on this analogy, we introduce a novel idea of inducing risk-sharing rules by randomizing existing capital allocation principles. Such an approach derives new risk-sharing rules complementing known results in the literature, which were largely based on economic principles and Pareto optimality. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_26491 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Capital-Allocation-Induced Risk Sharing Chong, Wing Fung Feng, Runhuan Ng, Kenneth Tsz Hin Risk Management This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a corporation based on the relationship among the individual risks, often also through the aggregate risk, the latter is an arrangement which collects risks from and allocates them to, also ex-ante, a group of participants. Drawing on this analogy, we introduce a novel idea of inducing risk-sharing rules by randomizing existing capital allocation principles. Such an approach derives new risk-sharing rules complementing known results in the literature, which were largely based on economic principles and Pareto optimality. |
| title | Capital-Allocation-Induced Risk Sharing |
| topic | Risk Management |
| url | https://arxiv.org/abs/2603.26491 |