| Article ID: | iaor20123432 |
| Volume: | 195 |
| Issue: | 1 |
| Start Page Number: | 5 |
| End Page Number: | 31 |
| Publication Date: | May 2012 |
| Journal: | Annals of Operations Research |
| Authors: | Tran Hien, Nguyen Hung, Pham Uyen |
| Keywords: | risk |
We examine two important claims by S.S. Wang and J. Treussard concerning the use of distortion functions as a universal tool in pricing financial and insurance risks, and the use of risk neutral probabilities in evaluating risks, respectively. Their claims seem reasonable only in the classical framework of Black–Scholes model, but not convincing in more extended and realistic models such as Lévy processes.