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Risks, Volume 1, Issue 2 (September 2013) – 2 articles , Pages 45-80

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Article
A Welfare Analysis of Capital Insurance
by Ekaterina Panttser and Weidong Tian
Risks 2013, 1(2), 57-80; https://doi.org/10.3390/risks1020057 - 17 Sep 2013
Cited by 3 | Viewed by 6620
Abstract
This paper presents a welfare analysis of several capital insurance programs in a rational expectation equilibrium setting. We first explicitly characterize the equilibrium of each capital insurance program. Then, we demonstrate that a capital insurance program based on aggregate loss is better than [...] Read more.
This paper presents a welfare analysis of several capital insurance programs in a rational expectation equilibrium setting. We first explicitly characterize the equilibrium of each capital insurance program. Then, we demonstrate that a capital insurance program based on aggregate loss is better than classical insurance, when big financial institutions have similar expected loss exposures. By contrast, classical insurance is more desirable when the bank’s individual risk is consistent with the expected loss in a precise way. Our analysis shows that a capital insurance program is a useful tool to hedge systemic risk from the regulatory perspective. Full article
(This article belongs to the Special Issue Systemic Risk and Reinsurance)
205 KiB  
Article
Optimal Reinsurance: A Risk Sharing Approach
by Alejandro Balbas, Beatriz Balbas and Raquel Balbas
Risks 2013, 1(2), 45-56; https://doi.org/10.3390/risks1020045 - 05 Aug 2013
Cited by 4 | Viewed by 5651
Abstract
This paper proposes risk sharing strategies, which allow insurers to cooperate and diversify non-systemic risk. We deal with both deviation measures and coherent risk measures and provide general mathematical methods applying to optimize them all. Numerical examples are given in order to illustrate [...] Read more.
This paper proposes risk sharing strategies, which allow insurers to cooperate and diversify non-systemic risk. We deal with both deviation measures and coherent risk measures and provide general mathematical methods applying to optimize them all. Numerical examples are given in order to illustrate how efficiently the non-systemic risk can be diversified and how effective the presented mathematical tools may be. It is also illustrated how the existence of huge disasters may lead to wrong solutions of our optimal risk sharing problem, in the sense that the involved risk measure could ignore the existence of a non-null probability of "global ruin" after the design of the optimal risk sharing strategy. To overcome this caveat, one can use more conservative risk measures. The stability in the large of the optimal sharing plan guarantees that "the global ruin caveat" may be also addressed and solved with the presented methods. Full article
(This article belongs to the Special Issue Systemic Risk and Reinsurance)
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