CHOQUET INSURANCE PRICING: A CAVEAT |
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| Authors: | Erio Castagnoli Fabio Maccheroni Massimo Marinacci |
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| Affiliation: | Istituto di Metodi Quantitativi, UniversitàBocconi, Milan; Istituto di Metodi Quantitativi and IGIER, UniversitàBocconi, Milan, and ICER, Turin; Dipartimento di Statistica e Matematica Applicata and ICER, Universitàdi Torino, Turin |
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| Abstract: | ![]()
We show that, if prices in a market are Choquet expectations, the existence of one frictionless asset may force the whole market to be frictionless. Any risky asset will cause this collapse if prices depend only on the distribution with respect to a given nonatomic probability measure; the frictionless asset has to be fully revealing if such dependence is not assumed. Similar considerations apply to law-invariant coherent risk measures. |
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| Keywords: | Choquet integral financial markets insurance pricing coherent risk measures |
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