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Risk Exchange as a Market or Production Game

Author

Listed:
  • Borglin, Anders

    (Department of Economics, Lund University)

  • Flåm, Sjur

    (Economics Department, Bergen University;)

Abstract

Risk exchange is considered here as a cooperative game with transferable utility. The set-up fits markets for insurance, securities and contingent endowments. When convoluted payoff is concave at the aggregate endowment, there is a price-supported core solution. Under variance aversion the latter mirrors the two-fund separation in allocating to each agent some sure holding plus a fraction of the aggregate.

Suggested Citation

  • Borglin, Anders & Flåm, Sjur, 2007. "Risk Exchange as a Market or Production Game," Working Papers 2007:16, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2007_016
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    File URL: http://project.nek.lu.se/publications/workpap/Papers/WP07_16.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    securities; mutual insurance; market or production games; transferable utility; extremal convolution; core solutions; variance or risk aversion; two-fund separation; CAPM;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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