Related papers: Insurance design and arson-type risks
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…
This paper studies an optimal insurance contracting problem in which the preferences of the decision maker given by the sum of the expected loss and a convex, increasing function of a deviation measure. As for the deviation measure, our…
With the recent growing number of cyberattacks and the constant lack of effective defense methods, cyber risks become ubiquitous in enterprise networks, manufacturing plants, and government computer systems. Cyber-insurance provides a…
We study a reinsurer who faces multiple sources of model uncertainty. The reinsurer offers contracts to $n$ insurers whose claims follow compound Poisson processes representing both idiosyncratic and systemic sources of loss. As the…
We examine the trade-off between the provision of incentives to exert costly effort (ex-ante moral hazard) and the incentives needed to prevent the agent from manipulating the profit observed by the principal (ex-post moral hazard).…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…
We study an optimal dividend problem for an insurer who simultaneously controls investment weights in a financial market, liability ratio in the insurance business, and dividend payout rate. The insurer seeks an optimal strategy to maximize…
This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
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…
How should successive generations insure each other when the young can default on previously promised transfers to the old? This paper studies intergenerational insurance that maximizes the expected discounted utility of all generations…
We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent privately knows his ability that determines his cost of effort. We show that linear contracts admit approximation…
What type of delegation contract should be offered when facing a risk of the magnitude of the pandemic we are currently experiencing and how does the likelihood of an exogenous early termination of the relationship modify the terms of a…
This paper proposes risk-averse and risk-agnostic formulations to robust design in which solutions that satisfy the system requirements for a set of scenarios are pursued. These scenarios, which correspond to realizations of uncertain…
In this paper, we study an optimal insurance problem for a risk-averse individual who seeks to maximize the rank-dependent expected utility (RDEU) of her terminal wealth, and insurance is priced via a general distortion-deviation premium…
In this paper, we study an optimal reinsurance-investment problem in a risk model with two dependent classes of insurance business, where the two claim number processes are correlated through a common shock component. We assume that the…
In economic analysis, rational decision-makers often take actions to reduce their risk exposure. These actions include purchasing market insurance and implementing prevention measures to modify the shape of the loss distribution. Under the…
We study the robust regulation of contracts in moral hazard problems. A firm offers a contract to incentivise a worker protected by limited liability. A regulator restricts the set of permissible contracts to (i) improve efficiency and (ii)…
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)…