Characterization Theorems for Scale Invariance Property of Insurance Premium Calculation Principles

Authors

  • Mykola Pratsiovytyi
  • Vitaliy Drozdenko Dragomanov National Pedagogical University, Kiev, Ukraine

Keywords:

haracterization theorem, insurance premium, scale invariance property, mean value principle, insurer/customer equivalent/zero utility principle, Swiss principle

Abstract

Characterization theorems for scale invariance property of insurance premium calculation principles are presented. Theorems formulated in a form of necessary and sufficient conditions for the mentioned property to be hold. Conditions are imposed on the auxiliary functions with the help of which several methods of pricing of insurance contracts are defined. Presented theorems cover cases of mean value, insurer equivalent utility, customer equivalent utility, and Swiss premium calculation principles. For mean value and customer zero utility premium calculation principles we present theorems demonstrating that in the case of pricing of only strictly positive risks, classes of the auxiliary functions producing scale invariant premiums are larger than in the general case. 

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Published

2014-08-01

Issue

Vol. 7 No. 3: (July 2014)

Section

Mathematics of Finance

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How to Cite

Characterization Theorems for Scale Invariance Property of Insurance Premium Calculation Principles. (2014). European Journal of Pure and Applied Mathematics, 7(3), 267-288. https://www.ejpam.com/index.php/ejpam/article/view/2044