Year: 1999
Type: report
Abstract: The present paper is devoted to di#erent methods of choice under risk in an actuarial setting. The classical expected utility theory is first presented, and its drawbacks are underlined. A second approach based on the so-called distorted expectation hypothesis is then described. It will be seen that the well-known stochastic dominance as well as the stop-loss order have common interpretations in both theories, while defining higher degree stochastic orders leads to different concepts. The aim of this paper is to emphasize the similarities of the two approaches of choice under risk as well as to point out their major differences.
Source: Lirias
DOI: 10.5169/seals-967294
Authors: Denuit, Michel, Dhaene, Jan, Van Wouve, Martine
Institution: KU Leuven
Language: English
Topic: Probability and Risk Models
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1652002437