Premium Determination Based on Change of Measure

Farrokh Guiahi, United-States

This paper discusses a premium determination principle based on the notion of a change of measure. By selecting the mean as premium based on a transformed measure, one can adhere to expectation principle with linearity property. The notion of change of measure is discussed and illustrated by a number of examples based on the application of Radon-Nikodym Theorem. Using Likelihood Ratios, as Radon-Nikodym derivatives, one can provide a unified approach to change of measure problems as illustrated by current research activities in this area.
Date: 1 June - Time: 11:00 to 12:30 - Room: 251
Theme: 1.A. Stochastic dependence