Insurance with frequent trading: A dynamic analysis of efficient insurance markets

José Penalva

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper extends existing insurance results on the type of insurance contracts needed for insurance market efficiency to a dynamic setting. It introduces continuosly open markets that allow for more efficient asset allocation. It also eliminates the role of preferences and endowments in the classification of risks, which is done primarily in terms of the actuarial properties of the underlying risk process. The paper further extends insurability to include correlated and catstrophic events. Under these very general conditions the paper defines a condition that determines whether a small number of standard insurance contracts (together with aggregate assets) suffice to complete markets or one needs to introduce such assets as mutual insurance.

Keywords: Risk sharing; insurance; complete markets; insurable risks (search for similar items in EconPapers)
JEL-codes: D81 D99 G11 (search for similar items in EconPapers)
Date: 2000-11
New Economics Papers: this item is included in nep-fmk, nep-ias and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:460

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