The Interaction between the Demands for Insurance and Insurable Assets

J. OF RISK AND UNCERTAINTY, Vol. 14 No. 1

Posted: 29 Jan 1997

See all articles by Louis Eeckhoudt

Louis Eeckhoudt

Facultes Universitaires Catholiques de Mons (FUCAM)

Jack Meyer

Michigan State University

Michael B. Ormiston

Arizona State University (ASU) - Economics Department

Abstract

Holding more of the riskless asset and insuring the risky asset are two ways to reduce portfolio risk. These methods can be employed jointly. As a result, the amount of insurance selected to indemnify against possible losses from holding a risky asset depends, in general, on the quantities of the risky and riskless assets held in the portfolio, and vice versa. In decision models where expected utility is maximized, relatively little has been done to integrate these two decisions into a single model. Such a model is formulated in this paper and the interaction between the demand for insurance and the demand for an insurable risky asset is examined.

JEL Classification: D80, G11, G22

Suggested Citation

Eeckhoudt, Louis and Meyer, Jack and Ormiston, Michael B., The Interaction between the Demands for Insurance and Insurable Assets. J. OF RISK AND UNCERTAINTY, Vol. 14 No. 1, Available at SSRN: https://ssrn.com/abstract=8077

Louis Eeckhoudt

Facultes Universitaires Catholiques de Mons (FUCAM) ( email )

Chaussee de Binche, 151
Mons 7000
Belgium

Jack Meyer (Contact Author)

Michigan State University ( email )

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

Michael B. Ormiston

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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