Sample Dependence of Risk Premia

An important problem in the insurance and banking industries is that of pricing risk or premium valuation. When the empirical data is not large, and loss distributions are inferred from the data, a potentially large sample dependence of the premia on the data is to be expected. The maximum entropy based methodologies that allow us to determine densities from empirical data with high precision, provide us with a framework within which to study how the sample dependence is transferred from the data to the premia via the density. It is the aim of this note to extend the analysis begun to examine this issue