Multivariate systemic optimal risk transfer equilibrium

A Systemic Optimal Risk Transfer Equilibrium (SORTE) was introduced in: “Systemic optimal risk transfer equilibrium”, Mathematics and Financial Economics (2021), for the analysis of the equilibrium among financial institutions or in insurance-reinsurance markets. A SORTE conjugates the classical Büh...

Full description

Saved in:
Bibliographic Details
Published in:Annals of operations research 2024-05, Vol.336 (1-2), p.435-480
Main Authors: Doldi, Alessandro, Frittelli, Marco
Format: Article
Language:English
Subjects:
Business and Management
Combinatorics
Equilibrium
Expected utility
Game theory
Multivariate analysis
Operations Research/Decision Theory
Original Research
Risk
Theory of Computation
Utility functions
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:A Systemic Optimal Risk Transfer Equilibrium (SORTE) was introduced in: “Systemic optimal risk transfer equilibrium”, Mathematics and Financial Economics (2021), for the analysis of the equilibrium among financial institutions or in insurance-reinsurance markets. A SORTE conjugates the classical Bühlmann’s notion of a risk exchange equilibrium with a capital allocation principle based on systemic expected utility optimization. In this paper we extend such a notion to the case when the value function to be optimized is multivariate in a general sense, and it is not simply given by the sum of univariate utility functions. This takes into account the fact that preferences of single agents might depend on the actions of other participants in the game. Technically, the extension of SORTE to the new setup requires developing a theory for multivariate utility functions and selecting at the same time a suitable framework for the duality theory. Conceptually, this more general framework allows us to introduce and study a Nash Equilibrium property of the optimizer. We prove existence, uniqueness, and the Nash Equilibrium property of the newly defined Multivariate Systemic Optimal Risk Transfer Equilibrium.
ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-022-04652-0