Related papers: Insurance makes wealth grow faster
It is still common wisdom amongst economists, politicians and lay people that economic growth is a necessity of our social systems, at least to avoid distributional conflicts. This paper challenges such belief moving from a purely physical…
Consider a cost-sharing game with players of different contribution to the total cost: an example might be an insurance company calculating premiums for a population of mixed-risk individuals. Two natural and competing notions of fairness…
In the context of a large class of stochastic processes used to describe the dynamics of wealth growth, we prove a set of inequalities establishing necessary and sufficient conditions in order to avoid infinite wealth concentration. These…
We study solvency of insurers in a comprehensive model where various economic factors affect the capital developments of the companies. The main interest is in the impact of real growth to ruin probabilities. The volume of the business is…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
We use the theory of coherent measures to look at the problem of surplus sharing in an insurance business. The surplus share of an insured is calculated by the surplus premium in the contract. The theory of coherent risk measures and the…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Cooperation is a persistent behavioral pattern of entities pooling and sharing resources. Its ubiquity in nature poses a conundrum. Whenever two entities cooperate, one must willingly relinquish something of value to the other. Why is this…
The paper is motivated by a problem concerning the monotonicity of insurance premiums with respect to their loading parameter: the larger the parameter, the larger the insurance premium is expected to be. This property, usually called…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
We note a simple mechanism that may at least partially resolve several outstanding economic puzzles, including why the cyclically adjusted price to earnings ratio of the S&P 500 index has been oddly high for the past two decades, why gains…
We consider the problem of optimal risk sharing in a pool of cooperative agents. We analyze the asymptotic behavior of the certainty equivalents and risk premia associated with the Pareto optimal risk sharing contract as the pool expands.…
How do individuals accumulate wealth as they interact economically? We outline the consequences of a simple microscopic model in which repeated pairwise exchanges of assets between individuals build the wealth distribution of a population.…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that…
This paper investigates a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility preference and the insurer is risk neutral and employs the mean-variance premium principle. To eliminate potential moral…
We consider the construction of insurance premiums that are monotonically increasing with respect to a loading parameter. By introducing weight functions that are totally positive of higher order, we derive higher monotonicity properties of…