Corporate insurance design with multiple risks and moral hazard
The 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.
|Date of creation:||2008|
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- Claude Fluet & François Pannequin, 1997. "Complete Versus Incomplete Insurance Contracts under Adverse Selection with Multiple Risks," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 22(2), pages 81-101, December.
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- 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.
- Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March. Full references (including those not matched with items on IDEAS)
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