Demand for Insurance in a Portfolio Setting

GENEVA PAPERS ON RISK AND INSURANCE THEORY, Vol. 20 No. 2, December 1995

Posted: 14 Jul 1998

See all articles by Jack Meyer

Jack Meyer

Michigan State University

Michael B. Ormiston

Arizona State University (ASU) - Economics Department

Abstract

This paper takes an additional step towards analyzing the demand for insurance in the context of a portfolio model. An investor is endowed with a portfolio containing a risky and riskless asset, that can be augmented by purchasing insurance. Here, insurance is paid for by reducing the quantity of the risky insurable asset, holding the quantity of the riskless asset fixed. In the standard insurance demand model, insurance is paid for by reducing the amount of the riskless asset. This distinction leads to a different insurance demand function because the opportunity cost of purchasing insurance is now random.

JEL Classification: G22

Suggested Citation

Meyer, Jack and Ormiston, Michael B., Demand for Insurance in a Portfolio Setting. GENEVA PAPERS ON RISK AND INSURANCE THEORY, Vol. 20 No. 2, December 1995, Available at SSRN: https://ssrn.com/abstract=7016

Jack Meyer

Michigan State University ( email )

201 Marshall Hall
East Lansing, MI 48824
United States
517-355-7749 (Phone)

Michael B. Ormiston (Contact Author)

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States
602-965-7350 (Phone)
602-965-0748 (Fax)

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