The N-Moment Insurance CAPM

Abstract
Until recently, the importance of skewness in the rate of return distribution has been largely unrecognized in financial journals. The re-emergence of skewness in financial literature is particularly relevant to catastrophe insurance products where some of the most extremely skewed distributions occur. This paper presents an argument for including a provision in the equilibrium premium to cover the cost of skewness. It also generalizes the insurance CAPM to n moments. This extension permits explicitly determining the impact that skewness and other higher moments have on the needed premium.
Volume
LXXXVIII
Page
39-63
Year
2001
Categories
Actuarial Applications and Methodologies
Investments
CAPM
Financial and Statistical Methods
Publications
Proceedings of the Casualty Actuarial Society
Prizes
Dorweiler Prize
Authors
Thomas J Kozik
Aaron M Larson

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