Insurance demand and welfare-maximizing risk capital—Some hints for the regulator in the case of exponential preferences and exponential claims
AbstractWe propose two models to analyze welfare-maximizing capital requirements for insurance companies considering that capital is costly and therefore affecting the premium. Within a continuous-time model, we derive insurance demand and welfare as a function of personal wealth, the insurance company’s wealth, and the claims process, and compare them to their counterparts in a static model. Besides discussing welfare-maximizing capital, we provide some new insights on insurance demand.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 53 (2013)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/505554
Welfare-maximizing risk capital; Insurance demand; Risk theory; Optimal stochastic control;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D60 - Microeconomics - - Welfare Economics - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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