Multi-period risk sharing under financial fairness

The theme of this dissertation is to investigate how financial risks can be allocated in a multi-agent and multi-period setting under the economic principle of “Pareto efficiency and financial fairness” (PEFF). The dissertation is a combination of theory and practice and consists of three papers. In the first paper, the existence and uniqueness of the PEFF solution, which combines risk preferences with risk-neutral valuation, is established theoretically. This PEFF approach is adapted into a moving-horizon approach in the second paper, and is then applied to calculate how investment risks can be allocated between current and future benefit payments for a collective pension fund within a realistic ALM framework. The last paper of the trilogy extends the results further by incorporating risk preferences on an individual level.