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Title: Systemic Optimal Risk Transfer Equilibrium
We propose a novel concept of a Systemic Optimal Risk Transfer Equilibrium (SORTE), which is inspired by the Bu ̈hlmann’s classical notion of an Equilibrium Risk Exchange. We provide sufficient general assumptions that guarantee existence, uniqueness, and Pareto optimality of such a SORTE. In both the Bu ̈hlmann and the SORTE definition, each agent is behaving ra- tionally by maximizing his/her expected utility given a budget constraint. The two approaches differ by the budget constraints. In Bu ̈hlmann’s definition the vector that assigns the budget constraint is given a priori. On the contrary, in the SORTE approach, the vector that assigns the budget constraint is endogenously determined by solving a systemic utility maximization. SORTE gives priority to the systemic aspects of the problem, in order to optimize the overall systemic performance, rather than to individual rationality.  more » « less
Award ID(s):
1814091
PAR ID:
10335536
Author(s) / Creator(s):
Date Published:
Journal Name:
Mathematics and financial economics
Volume:
15
Issue:
2
ISSN:
1862-9660
Page Range / eLocation ID:
233-274
Format(s):
Medium: X
Sponsoring Org:
National Science Foundation
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