Skip to main content
SpringerLink
Log in

Total and partial Bivariate Risk Premia: An Extension

  • Published:
Theory and Decision Aims and scope Submit manuscript

Abstract

This paper investigates the link between the total bivariate risk premium and the sum of partial bivariate risk premia. Whereas in the case of small risks, the non interaction between risks is a sufficient condition to obtain the equality between the total risk premium and the sum of partial risk premia, the paper shows that this condition is not sufficient for large risks. The non interaction between risks occurs in two cases: if risks are independent or if individual's marginal utility of one good is independent of the endowment in the other. Without restriction on the utility function, none of these two conditions is sufficient for large risks. If attention is restricted to preferences that exhibit constant absolute risk aversion, the non variability of the marginal utility of good one with respect to variations in endowment in the other remains a sufficient condition, while the independence between risks does not.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Bleichrodt, H., Crainich, D. and Eeckhoudt, L. (2003), The effect of comorbidities on treatment decisions, Forthcoming in the Journal of Health Economics.

  • Chalfant, J.A. and Finkelshtain, I. (1993), Portfolio choices in the presence of other risk, Management Science 39(8), 925–936.

    Google Scholar 

  • Courbage, C. (2001), On bivariate risk premia, Theory and Decision 50, 29–34.

    Google Scholar 

  • Doherty, N.A., Loubergé, H. and Schlesinger, H. (1987), Additive and multiplicative risk premiums with multiple sources of risk, Scandinavian Actuarial Journal {pp41–49}.

  • Duncan, G.T. (1977), A matrix measure of multivariate local risk aversion, {tiEconometrica} 45, 895–903.

  • Gollier, C. and Pratt, J.W. (1996), Risk vulnerability and the temperingeffect of background risk, Econometrica 64, 1109–1124.

    Google Scholar 

  • Karni, E. (1979), Multivariate risk aversion, Econometrica 47, 1391–1401.

    Google Scholar 

  • Kihlstrom, R.E., Romer, D. and Williams, S. (1981), Risk aversion with random initial wealth, Econometrica 49, 621–638.

    Google Scholar 

  • Pratt, J.W. and Zeckhauser, R. (1987), Proper risk aversion, Econometrica 55, 143–154.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Universite Claude Bernard Lyon I, L.A.S.S. Bat. 101, 43 Bld. Du 11 November 1981, 69622, Villeurbanne Cedex, France

    Béatrice Rey

Authors
  1. Béatrice Rey
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Béatrice Rey.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Rey, B. Total and partial Bivariate Risk Premia: An Extension. Theory and Decision 55, 59–69 (2003). https://doi.org/10.1023/B:THEO.0000019078.87122.ce

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:THEO.0000019078.87122.ce

Search

Navigation