THE DESIGN OF OPTIMAL INSURANCE CONTRACTS - A TOPOLOGICAL APPROACH

Authors
Citation
S. Spaeter et P. Roger, THE DESIGN OF OPTIMAL INSURANCE CONTRACTS - A TOPOLOGICAL APPROACH, Geneva papers on risk and insurance. Theory, 22(1), 1997, pp. 5-19
Citations number
21
Categorie Soggetti
Business Finance",Economics
ISSN journal
09264957
Volume
22
Issue
1
Year of publication
1997
Pages
5 - 19
Database
ISI
SICI code
0926-4957(1997)22:1<5:TDOOIC>2.0.ZU;2-I
Abstract
This article deals with the optimal design of insurance contracts when the insurer faces administrative costs. If the literature provides ma ny analyses of risk sharing with such costs, it is often assumed that these costs are linear. Furthermore, mathematical tools or initial con ditions differ from one paper to another. We propose here a unified fr amework in which the problem is presented and solved as an infinite di mensional optimization program on a functional vector space equipped w ith an original norm. This general approach leads to the optimality of contracts lying on the frontier of the indemnity functions set. This frontier includes, in particular, contracts with a deductible, with to tal insurance and the null vector. Hence, we unify the existing result s and point out some extensions.