Risk-sharing and probabilistic network structure

Marco Pelliccia

No 1214, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: This paper studies the impact of a probabilistic risk-sharing network structure on the optimal portfolio composition. We show that, even assuming identical agents, we are able to differentiate their optimal risk-choice once we assume the link-structure defining their relationship probabilistic. In particular, the final agent's portfolio composition is function of his location in the network. If we assume positive asset-correlation coefficients, the relative location of a player in the graph influences his risk-behaviour as much as those of his direct and indirect partners in a not-straightforward way. We analyse also two potential "centrality measures" able to select the key-player in the risk-sharing network. The findings may help to select the "central" agent in a risk-sharing community and to forecast the risk-exposure of the players. Finally, this paper may explain natural differences between identical rational agents' choices emerging in a probabilistic network setup.

Keywords: informal insurance; risk-sharing; network (search for similar items in EconPapers)
JEL-codes: D81 D85 O17 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-ias and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://eprints.bbk.ac.uk/id/eprint/5945 First version, 2012 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bbk:bbkefp:1214

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics Malet Street, London WC1E 7HX, UK.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).