On iterative premium calculation principles under Cumulative Prospect Theory

In the paper we analyze the iterativity condition for zero utility principle adjusted to Cumulative Prospect Theory. We prove, under mild conditions, that the premium principle is iterative if and only if the value function is linear or exponential and probability distortion functions are identities, i.e. the probabilities are not distorted.

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Year of publication:	2013
Authors:	Kaluszka, Marek ; Krzeszowiec, Michał
Published in:	Insurance: Mathematics and Economics. - Elsevier, ISSN 0167-6687. - Vol. 52.2013, 3, p. 435-440
Publisher:	Elsevier
Subject:	Cumulative Prospect Theory \| Iterativity \| Zero utility principle \| Non-expected utility \| Generalized Choquet integral

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Type of publication:	Article
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; G22 - Insurance; Insurance Companies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011046613