Insurance with frequent trading
AbstractThis paper looks at the dynamic management of risk in an economy with discrete time consumption and endowments and continuous trading. I study how agents in such an economy deal with all the risk in the economy and attain their Pareto optimal allocations by trading in a few natural securities: private insurance contracts and a common set of derivatives on the aggregate endowment. The parsimonious nature of the implied securities needed for Pareto optimality suggests that in such contexts complete markets is a very reasonable assumption.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 365.
Date of creation: Oct 1997
Date of revision: Mar 1999
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Web page: http://www.econ.upf.edu/
Risk-sharing; insurance; hedging; point-processes; complete markets; general equilibrium;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D99 - Microeconomics - - Intertemporal Choice - - - Other
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-03-30 (All new papers)
- NEP-IAS-1999-03-29 (Insurance Economics)
- NEP-MIC-1999-03-29 (Microeconomics)
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