This contribution starts out by noting a conflict of interest between consumers and insurers. Consumers face positive correlation in their assets (health, wealth, wisdom, i.e. skills), causing them to demand a great deal of insurance coverage. Insurers on the other hand eschew positively...

Financial engineering offers the potential to significantly reduce the consumption fluctuations faced by individuals, households, and firms. Yet much of this potential remains unfulfilled. This paper studies the adoption of an innovative rainfall insurance product designed to compensate...

This paper explores the application of contingent claims analysis (CCA) to two quot;hotquot; issues in life-cycle finance: (1) investing for retirement and (2) deciding when, if ever, to switch careers. Participants in individual retirement accounts do not have the time or the knowledge to make...

Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might reduce the value policyholders attach to and premiums they...

The financial and the insurance markets are increasingly penetrating each other, accounting for the fact that insurers are more and more often seen as major institutional investors of capital markets. The capital market offers a range of new opportunities, although it is not devoid of faults,...

Es wird dargelegt, dass das im Rahmen des Asset-Liability-Managements häufig gewählte Immunisierungsverfahren des Durationsmatch unter Verwendung der traditionellen Yieldbeta-Methode nur dann sachgerecht eingesetzt werden kann, wenn das betrachtete Unternehmen keinen sicheren realen und damit...

This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach...

This paper argues that the Eurozone crisis stems from a risk management failure in the Eurosystem's design, and that applying insurance theory is useful. We model risk neutral agents choosing portfolios of government bonds of n countries in a monetary union and other assets. We firstly analyse a...

Given two sets of random variables, how can one determine whether the former variables are more interdependent than the latter? This question is of major importance to economists, for example, in comparing how various policies affect systemic risk or income inequality. Moreover, correlation is...

In many economic applications involving comparisons of multivariate distributions, supermodularity of an objective function is a natural property for capturing a preference for greater interdependence. One multivariate distribution dominates another according to the supermodular stochastic...