Game-theoretic approaches to optimal risk sharing

T.J. Boonen

Research output: ThesisDoctoral ThesisScientific

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Abstract

This Ph.D. thesis studies optimal risk capital allocation and optimal risk sharing. The first chapter deals with the problem of optimally allocating risk capital across divisions within a financial institution. To do so, an asymptotic approach is used to generalize the well-studied Aumann-Shapley value. Even if the Aumann-Shapley value does not exist, which is due to non-differentiability problems, this approach yields an explicit allocation rule. The second chapter involves optimal natural hedging of longevity risk among pension funds and life insurers. Lack of consensus regarding accurate pricing hampers trade. Techniques from cooperative game theory are used to characterize risk redistributions and prizes. The introduction of the Basel II regulation and the Swiss Solvency Test has increased the use of risk measures to evaluate financial or insurance risk. The third chapter deals with optimal trading if firms use risk measures to evaluate risk; both in an exchange market and in an illiquid market. Under mild conditions, there is a unique equilibrium risk redistribution. If the market is illiquid, the same risk redistribution is characterized axiomatically.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • De Waegenaere, Anja, Promotor
  • Norde, Henk, Promotor
Award date15 Jan 2014
Place of PublicationTilburg
Publisher
Print ISBNs9789056683795
Publication statusPublished - 2014

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Optimal risk sharing
Redistribution
Risk capital
Shapley value
Measure of risk
Capital allocation
Hedging
Risk measures
Longevity risk
Basel II
Pension funds
Insurer
Allocation rules
Financial institutions
Cooperative game theory
Insurance risk
Solvency
Illiquid markets
Pricing
Financial risk

Cite this

Boonen, T. J. (2014). Game-theoretic approaches to optimal risk sharing. Tilburg: CentER, Center for Economic Research.
Boonen, T.J.. / Game-theoretic approaches to optimal risk sharing. Tilburg : CentER, Center for Economic Research, 2014. 158 p.
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Boonen, TJ 2014, 'Game-theoretic approaches to optimal risk sharing', Doctor of Philosophy, Tilburg University, Tilburg.

Game-theoretic approaches to optimal risk sharing. / Boonen, T.J.

Tilburg : CentER, Center for Economic Research, 2014. 158 p.

Research output: ThesisDoctoral ThesisScientific

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Boonen TJ. Game-theoretic approaches to optimal risk sharing. Tilburg: CentER, Center for Economic Research, 2014. 158 p. (CentER Dissertation Series).