On the role of market insurance in a dynamic model

Helge Braun () and Winfried Koeniger

The Geneva Papers on Risk and Insurance Theory, 2007, vol. 32, issue 1, 61-90

Abstract: Durables like cars or houses are a substantial component in the balance sheets of households. These durables are exposed to risk and can be insured in the market. We build a dynamic model in which agents have three possibilities to cope with the risk exposure of the durable stock: (i) purchase of market insurance, (ii) buffer-stock saving of the riskless asset or (iii) adjustment of the durable stock. We calibrate our model to the US economy and find a small role for market insurance. Copyright The Geneva Association 2007

Keywords: Consumption; Durables; Uncertainty; Insurance; Buffer-stock wealth; D81; E21; G22 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10713-007-0001-5

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