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Insurance with frequent trading;
Insurance with Frequent Trading: A Dynamic Analysis of Efficient Insurance Markets
Penalva, José
Universitat Pompeu Fabra. Departament d'Economia i Empresa
This paper looks at the dynamic management of risk in an economy with discrete time consumption and endowments and continuous trading. I study how agents in such an economy deal with all the risk in the economy and attain their Pareto optimal allocations by trading in a few natural securities: private insurance contracts and a common set of derivatives on the aggregate endowment. The parsimonious nature ofthe implied securities needed for Pareto optimality suggests that insuch contexts complete markets is a very reasonable assumption.
2005-09-15
Finance and Accounting
risk-sharing
insurance
hedging
point-processes
complete markets
general equilibrium
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Working Paper
         

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