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Catastrophe Aversion and Risk Equity in an Interdependent World

Bernard, Carole, Rheinberger, Christoph and Treich, Nicolas (2017) Catastrophe Aversion and Risk Equity in an Interdependent World. Management Science. (In Press)

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Official URL: http://tse-fr.eu/pub/31748

Abstract

Catastrophe aversion and risk equity are important concepts in both risk management theory and practice. Keeney (1980) was the first to formally define these concepts. He demonstrated that the two concepts are always in conflict. Yet this result is based on the assumption that individual risks are independent and has thus limited relevance for real world catastrophic events. We extend Keeney’s result to dependent risks and derive the conditions under which more correlation between two risks induces a more catastrophic risk. We then generalize some of the results for multiple correlated risks.

Item Type: Article
Language: English
Date: 2017
Refereed: Yes
Uncontrolled Keywords: risk equity, catastrophe aversion, correlation, dependence
Subjects: B- ECONOMIE ET FINANCE
Divisions: Toulouse School of Economics - TSE
Site: UT1
Date Deposited: 19 May 2017 07:16
Last Modified: 19 May 2017 07:16
OAI ID: oai:tse-fr.eu:31748
URI: http://publications.ut-capitole.fr/id/eprint/24096

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