Corporate insurance design with multiple risks and moral hazard
AbstractThe paper provides novel insights on the effect of a firm's risk management objective on the optimal design of risk transfer instruments. I analyze the interrelation between the structure of the optimal insurance contract and the firm's objective to minimize the required equity it has to hold to accommodate losses in the presence of multiple risks and moral hazard. In contrast to the case of risk aversion and moral hazard, the optimal insurance contract involves a joint deductible on aggregate losses in the present setting. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2008/54.
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: House of Finance, Grüneburgplatz 1, HPF H5, D-60323 Frankfurt am Main
Phone: +49 (0)69 798-30050
Fax: +49 (0)69 798-30077
Web page: http://www.ifk-cfs.de/
More information through EDIRC
Multiline Insurance; Umbrella Policies; Integrated Risk Management; Deductible Insurance;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993.
" Risk Management: Coordinating Corporate Investment and Financing Policies,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1629-58, December.
- Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1992. "Risk Management: Coordinating Corporate Investment and Financing Policies," NBER Working Papers 4084, National Bureau of Economic Research, Inc.
- Antonio Nicolo’ & Loriana Pelizzon, 2006.
"Credit Derivatives, Capital Requirements and Opaque OTC Markets,"
2006_58, Department of Economics, University of Venice "Ca' Foscari".
- Nicolò, Antonio & Pelizzon, Loriana, 2008. "Credit derivatives, capital requirements and opaque OTC markets," Journal of Financial Intermediation, Elsevier, vol. 17(4), pages 444-463, October.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
- Gorton, Gary & Pennacchi, George, 1990. " Financial Intermediaries and Liquidity Creation," Journal of Finance, American Finance Association, vol. 45(1), pages 49-71, March.
- Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
- Scott E. Harrington & Greg Niehaus & Kenneth J. Risko, 2002. "Enterprise Risk Management: The Case Of United Grain Growers," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(4), pages 71-81.
- Gollier, Christian & Schlesinger, Harris, 1995.
" Second-Best Insurance Contract Design in an Incomplete Market,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 97(1), pages 123-35, March.
- GOLLIER, Christian & SCHLESINGER, Harris, 1992. "Second-best insurance contract design in an incomplete market," CORE Discussion Papers 1992012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Peter M. DeMarzo, 2005. "The Pooling and Tranching of Securities: A Model of Informed Intermediation," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 1-35.
- Michael Breuer, 2005. "Multiple Losses, "EX ANTE" Moral Hazard, and the Implications for Umbrella Policies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(4), pages 525-538.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.