Insurance demand and first order risk increases under (μ,σ)-preferences

We study the optimal insurance demand in the μ,σ space when the decision-maker faces a first-order risk increase. In particular, we investigate the effect of an increase in the expected damage when the variance is held constant. An unambiguous result is derived on insurance demand that differs from previous results in the literature in that it does not depend on additional assumption such as DARA utility functions or the level of risk aversion elasticity.

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Year of publication:	2014
Authors:	Bonilla, Claudio A. ; Ruiz, Jose L.
Published in:	Finance Research Letters. - Elsevier, ISSN 1544-6123. - Vol. 11.2014, 3, p. 219-223
Publisher:	Elsevier
Subject:	Insurance demand \| Risk increase \| Risk aversion \| DARA preferences

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Type of publication:	Article
Classification:	D80 - Information and Uncertainty. General ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G10 - General Financial Markets. General ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011065850