This paper examines the three main tools of risk management in a setting where reliability cannot be guaranteed. Thus, for example, insurers might be insolvent, sprinkler systems might be inoperative and alarm systems might be faulty. These types of nonreliability are shown to have significant...

In this paper we develop a contingent claim model to evaluate the equity and liabilities of a life insurance company. The limited liability of shareholders is explicitly modelled. We focus on a specific type of life insurance policy–namely, the profit-sharing policy. In this policy, the...

Although risk aversion has been used in economic models for over 275 years, the past few decades have shown how higher order risk attitudes are also quite important. A behavioural approach to defining such risk attitudes was developed by Eeckhoudt and Schlesinger, based on simple lottery...