Multi Period Risk Sharing Under Financial Fairness
We work with a multi period system where a finite number of agents need to share multiple monetary risks. We look for the solutions that are both Pareto efficient utility wise and financially fair value wise. A buffer enables the inter temporal capital transfer. Expected utility is used to evaluate the utility, and a risk neutral measure is essential for determining the risk sharing rules. It can be shown that in the model setting there always exists a unique risk sharing rule that is both Pareto efficient and financially fair. An iterative algorithm is introduced to calculate this rule numerically.