This paper investigates a corporation's risk management response to highly dynamic risks. Using a unique data set on the German terrorist insurance market, the paper tests whether corporate risk managers have a clear understanding of the probability distribution of highly dynamic risks or if...

This article extends the theory of corporate risk management to encompass highly dynamic risks. Taking Viscusi'�s (1989) prospective reference from the context of individual decision making and applying it to a corporate context we propose a theory of how corporations process new information....