Corporate Management of Highly Dynamic Risks: The Case of Terrorism Insurance in Germany
AbstractThis article extends the theory of corporate risk management to encompass highly dynamic risks. Taking Viscusi'�s (1989) prospective reference from the context of individual decision making and applying it to a corporate context we propose a theory of how corporations process new information. Using unique data on all terrorism insurance policies sold in Germany we find support for this concept of risk-updating by showing that the demand for terrorism insurance is strongly determined by the recent occurrence of terrorist attacks.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7221.
Date of creation: 13 Dec 2007
Date of revision:
Corporate Insurance; Risk Management; Terrorism Insurance; Expected Utility; Prospect Theory;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-23 (All new papers)
- NEP-IAS-2008-02-23 (Insurance Economics)
- NEP-RMG-2008-02-23 (Risk Management)
- NEP-UPT-2008-02-23 (Utility Models & Prospect Theory)
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