Purpose – The paper aims to examine the practical importance of the finding of Mayers and Smith, that underinvestment is a problem when debt exposed to bankruptcy is part of the financial structure. Design/methodology/approach – The paper examines critically the assumptions underlying the...

Purpose – The paper aims to examine the practical importance of the finding of Mayers and Smith, that underinvestment is a problem when debt exposed to bankruptcy is part of the financial structure. Design/methodology/approach – The paper examines critically the assumptions underlying the...

Purpose – The paper aims to examine the practical importance of the finding of Mayers and Smith, that underinvestment is a problem when debt exposed to bankruptcy is part of the financial structure. Design/methodology/approach – The paper examines critically the assumptions underlying the...

High correlations between risks can increase required insurer capital and/orreduce the availability of insurance. For such insurance lines, securitizationis rapidly emerging as an alternative form of risk transfer. The ultimatesuccess of securitization in replacing or complementing traditional...

This article models consumption and insurance decisions in a continuous-time, finite-horizon setting. We allow the consumer to acquire a "taste for the good life" by making current preferences for consumption dependent upon the individual's past consumption. The optimal consumption path is...