Optimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk

Takashi Misumi, 隆司 三隅, Hisashi Nakamura, 恒 中村, Koichiro Takaoka and 浩一郎 髙岡

No G-1-4, Working Paper Series from Hitotsubashi University Center for Financial Research

Abstract: This paper provides a tractable framework to study optimal risk sharing between an investor and a firm with general utility forms in the presence of moral hazard under market risk and jump risk. We show that, for any two-date discrete-time moral hazard model, there exists a continuous-time model that obtains the same optimal result. Moreover, we characterize the optimal risk sharing explicitly, in particular, the structural effect of jump risk on the optimal allocations.

Pages: 18 pages
Date: 2013-03
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Citations: View citations in EconPapers (2)

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