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Kenneth Arrow and Karl Borch published several important articles in the early 1960s that can be viewed as the beginning of modern economic analysis of insurance activity. This chapter reviews the main theoretical and empirical contributions in insurance economics since that time. The review...
Persistent link: https://www.econbiz.de/10014025527
This paper studies the optimal contract offered by a risk-neutral principal to a risk-averse agent when the agent’s hidden ability and action both improve the probability of the project being successful. We show that if the agent is sufficiently prudent and able, the principal induces a higher...
Persistent link: https://www.econbiz.de/10011849217
We investigate whether US households possess advance information about their future income and what this means for consumption insurance. Based on insights from a theoretical model, we propose a new test to detect advance information, which requires only panel data on consumption and income....
Persistent link: https://www.econbiz.de/10013186823
hypothesis. This leads to a trade-off between expected blue-sky return – the expected return excluding default scenarios – and … extreme risk estimated from scenarios leading to default. An empirical study on the past 90 years shows that this trade …
Persistent link: https://www.econbiz.de/10013045157
The "money's worth" measure has been used to assess whether annuities are fairly valued and also as evidence for adverse selection in the annuity market. However, a regulated life assurer with concerns about predicting long-run mortality may price annuities to reduce these risks which will...
Persistent link: https://www.econbiz.de/10013081487
This work takes a closer look on the predominant assumption in usual lemon market models of having finitely many or even only two different levels of quality. We model a situation which is close to the classical monopolistic setting but admits an interval of possible quality values....
Persistent link: https://www.econbiz.de/10010403068
It is widely held that better financial reporting makes investors more confident in their predictions of future cash flows and reduces their required risk premia. The logic is that more information leads necessarily to more certainty, and hence lower subjective estimates of firm "beta" or...
Persistent link: https://www.econbiz.de/10013033047
This paper lays down the rudiments of a descriptive theory of competition among the digital tech platforms known as “FANGs” (Facebook, Amazon, Netflix and Google), amidst rising academic and policy polarization over the answer to what seems to be – at least at the formulation level – a...
Persistent link: https://www.econbiz.de/10014105467
Potential Future Exposure (PFE) is a standard risk metric for managing business unit counterparty credit risk but there is debate on how it should be calculated. The debate has been whether to use one of many historical ("physical") measures (one per calibration setup), or one of many...
Persistent link: https://www.econbiz.de/10013010202
A buyer makes an offer to a privately informed seller for a good of uncertain quality. Quality determines both the seller's valuation and the buyer's valuation, and the buyer evaluates each contract according to its worst-case performance over a set of probability distributions. This paper...
Persistent link: https://www.econbiz.de/10011855861