Generalized Multiplicative Risk Apportionment
Hongxia Wang
Risks · 2019
doi:10.3390/risks7020065 (opens in a new tab)
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Abstract
This work examines apportionment of multiplicative risks by considering three dominance orderings: first-degree stochastic dominance, Rothschild and Stiglitz’s increase in risk and downside risk increase. We use the relative <i>n</i>th-degree risk aversion measure and decreasing relative <i>n</i>th-degree risk aversion to provide conditions guaranteeing the preference for “harm disaggregation” of multiplicative risks. Further, we relate our conclusions to the preference toward bivariate lotteries, which interpret correlation-aversion, cross-prudence and cross-temperance.
Abstract licence: CC BY
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