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Optimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk

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  • Misumi, Takashi
  • 三隅, 隆司
  • Nakamura, Hisashi
  • 中村, 恒
  • Takaoka, Koichiro
  • 髙岡, 浩一郎

Abstract

This paper provides a tractable framework to study optimal risk sharing between an investor and a firm with general utility forms in the presence of moral hazard under market risk and jump risk. We show that, for any two-date discrete-time moral hazard model, there exists a continuous-time model that obtains the same optimal result. Moreover, we characterize the optimal risk sharing explicitly, in particular, the structural effect of jump risk on the optimal allocations.

Suggested Citation

  • Misumi, Takashi & 三隅, 隆司 & Nakamura, Hisashi & 中村, 恒 & Takaoka, Koichiro & 髙岡, 浩一郎, 2013. "Optimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk," Working Paper Series G-1-4, Hitotsubashi University Center for Financial Research.
    • Handle: RePEc:hit:hcfrwp:g-1-4
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/25548/070hcfrWP_1_004.pdf
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    Cited by:

    1. Hisashi Nakamura & Koichiro Takaoka, 2014. "A Continuous-Time Optimal Insurance Design with Costly Monitoring," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 21(3), pages 237-261, September.
    2. Misumi, Takashi & 三隅, 隆司 & Nakamura, Hisashi & 中村, 恒 & Takaoka, Koichiro & 高岡, 浩一郎, 2014. "Moral-Hazard Premium," Working Paper Series G-1-7, Hitotsubashi University Center for Financial Research.

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