Intertemporal Insurance: ABSTRACT

Assuming insurable events are generated by a marked point process, this article develops a framework in which insurance markets are dynamically complete in the sense of Kreps (1982). Insurance contracts can then be priced using the techniques of intertemporal finance: the equlibrium price of an insu...

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Bibliographic Details
Published in:The Journal of risk and insurance 1997-12, Vol.64 (4), p.579
Main Authors: Ellickson, Bryan, Penalva-Zuasti, Jose
Format: Article
Language:English
Subjects:
Algebra
Consumers
Consumption
Equilibrium
Expected values
Random variables
Stochastic models
Online Access:Get full text
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Summary:Assuming insurable events are generated by a marked point process, this article develops a framework in which insurance markets are dynamically complete in the sense of Kreps (1982). Insurance contracts can then be priced using the techniques of intertemporal finance: the equlibrium price of an insurance contract equals the discounted expected value of the payments which will be made in the event of an "accident" where expectation is taken with respect to the risk-neutral probability measure of Harrison and Kreps (1979). The difference between this expectation and the expectation under the true probability measure represents the equilibrium load.
ISSN:0022-4367
1539-6975