Insurance with frequent trading: A dynamic analysis of efficient insurance markets
AbstractThis paper extends existing insurance results on the type of insurance contracts needed for insurance market efficiency to a dynamic setting. It introduces continuosly open markets that allow for more efficient asset allocation. It also eliminates the role of preferences and endowments in the classification of risks, which is done primarily in terms of the actuarial properties of the underlying risk process. The paper further extends insurability to include correlated and catstrophic events. Under these very general conditions the paper defines a condition that determines whether a small number of standard insurance contracts (together with aggregate assets) suffice to complete markets or one needs to introduce such assets as mutual insurance.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 460.
Date of creation: Nov 2000
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Web page: http://www.econ.upf.edu/
Risk sharing; insurance; complete markets; insurable risks;
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-2000-05-16 (All new papers)
- NEP-FMK-2000-05-16 (Financial Markets)
- NEP-IAS-2000-05-16 (Insurance Economics)
- NEP-MIC-2000-05-16 (Microeconomics)
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