Risk capital allocations are of central importance in performance measurement. A popular solution concept in the academic literature is the Euler rule. This paper studies the volatility of the Euler rule for capital allocation in static and dynamic empirical applications with a simulated...

We investigate competitive equilibria in a special type of incomplete markets, referred to as a comonotone market, where agents can only trade such that their risk allocation is comonotonic. The comonotone market is motivated by the no-sabotage condition. For instance, in a standard insurance...

This paper examines the consequences for a life annuity insurance company if the Solvency II Solvency Capital Requirements (SCR) are calibrated based on Expected Shortfall (ES) instead of Value-at-Risk (VaR). We focus on the risk modules of the SCRs for the three risk classes equity risk,...

This paper analyzes optimal risk sharing among agents that are endowed with either expected utility preferences or with dual utility preferences. We find that Pareto optimal risk redistributions and the competitive equilibria can be obtained via bargaining with a hypothetical representative...

In this paper, we consider a one-period optimal reinsurance design model with n reinsurers and an insurer. For very general preferences of the insurer, we obtain that there exists a very intuitive pricing formula for all reinsurers that use a distortion premium principle. The insurer determines...

Existing risk capital allocation methods, such as the Euler rule, work under the explicit assumption that portfolios are formed as linear combinations of random loss/profit variables, with the firm being able to choose the portfolio weights. This assumption is unrealistic in an insurance...

We study economic pricing of reinsurance contracts via competition of an insurer with multiple reinsurers. All firms are endowed with distortion risk measures or expected exponential utilities. We require that contracts are Pareto optimal, individually rational, and satisfy a competition...

This paper studies the set of Pareto optimal insurance contracts and the core of an insurance game. Our setting allows multiple insurers with translation invariant preferences. We characterise the Pareto optimal contracts, which determines the shape of the indemnities. Closed-form and numerical...

To manage the risk of insurance companies, a reinsurance transaction is among the myriad risk management mechanisms the top ranked choice. In this paper, we study the design of optimal reinsurance contracts within a risk measure minimization framework and subject to the Vajda condition. The...