On the role of market insurance in a dynamic model
Durables like cars or houses are a substantial component in the balance sheets of households. These durables are exposed to risk and can be insured in the market. We build a dynamic model in which agents have three possibilities to cope with the risk exposure of the durable stock: (i) purchase of market insurance, (ii) buffer-stock saving of the riskless asset or (iii) adjustment of the durable stock. We calibrate our model to the US economy and find a small role for market insurance. The Geneva Risk and Insurance Review (2007) 32, 61–90. doi:10.1007/s10713-007-0001-5
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Volume (Year): 32 (2007)
Issue (Month): 1 (June)
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