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CHOQUET INSURANCE PRICING: A CAVEAT
Author(s) -
Castagnoli Erio,
Maccheroni Fabio,
Marinacci Massimo
Publication year - 2004
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.0960-1627.2004.00201.x
Subject(s) - economics , asset (computer security) , mathematical economics , measure (data warehouse) , econometrics , actuarial science , financial economics , computer science , database , computer security
We show that, if prices in a market are Choquet expectations, the existence of one frictionless asset may force the whole market to be frictionless. Any risky asset will cause this collapse if prices depend only on the distribution with respect to a given nonatomic probability measure; the frictionless asset has to be fully revealing if such dependence is not assumed. Similar considerations apply to law‐invariant coherent risk measures.