We study the optimal insurance design problem. This is a risk sharing problem between an insured and an insurer. The … for the insurance cover. This risk-adjusted premium calculation principle uses the cost-of-capital approach as it is … main novelty in this paper is that we study this optimization problem under a risk-adjusted premium calculation principle …

in which insurance demand is higher (lower) than state-independent background risk. Second, we consider a situation where …, ambiguity aversion increases insurance demand compared to the case of risk. Finally, we discuss how our framework can explain …This study considers the optimal demand for insurance in the presence of state-dependent background uncertainty. Its …