Intertemporal Insurance

Assuming insurable events are generated by a marked point process, this article develops a framework in which insurance markets are dynamically complete in the sense of Kreps (1982). Insurance contracts can then be priced using the techniques of intertemporal finance: the equlibrium price of an insurance contract equals the discounted expected value of the payments which will be made in the event of an quot;accidentquot; where expectation is taken with respect to the risk-neutral probability measure of Harrison and Kreps (1979). The difference between this expectation and the expectation under the true probability measure represents the equilibrium load