Determination of Risk Pricing Measures from Market Prices of Risk Articles uri icon

publication date

  • December 2008

start page

  • 437

end page

  • 443


  • 3


  • 43

International Standard Serial Number (ISSN)

  • 0167-6687

Electronic International Standard Serial Number (EISSN)

  • 1873-5959


  • A new insurance provider or a regulatory agency may be interested in determining a risk measure consistent with observed market prices of a collection of risks. Using a relationship between distorted coherent risk measures and spectral risk measures, we provide a method for reconstructing distortion functions from the observed prices of risk. The technique is based on an appropriate application of the method of maximum entropy in the mean, which builds upon the classical method of maximum entropy.