Date: Wednesday 30th April at 2PM
Title: Risk Sharing under Ambiguity
Abstract: The distribution of future losses related, for example, to climate risk is typically not perfectly known and is subject to ambiguity. In this context, we investigate how to design an optimal sharing scheme among agents (insurers, reinsurers, countries). We first derive the optimal risk-sharing arrangement under mean-variance preferences, considering distributional ambiguity of the aggregate risk to be shared. It is shown that proportional risk-sharing is always optimal and that the presence of ambiguity does not affect the structure of the risk-sharing arrangement, making it robust to such uncertainty. Desirable properties of risk sharing under ambiguity are discussed and several generalizations are also explored.
Joint work with Steven Vanduffel