We study the interaction between insurance and capital markets within single but general framework. We show that capital markets greatly enhance the risk sharing capacity of insurance markets and the scope of risks that are insurable because efficiency does not depend on the number of agents at...

In this paper we analyze trading behaviour in an economy with substantial individual heterogeneity and individual agent- specific endowment risks. We establish that markets can be made effectively complete with a very small number of assets. In particular, if full insurance contracts are...

This paper looks at the dynamic management of risk in an economy with discrete time consumption and endowments and continuous trading. I study how agents in such an economy deal with all the risk in the economy and attain their Pareto optimal allocations by trading in a few natural securities:...

The 1994 Northridge earthquake sent ripples to insurance companies everywhere. This was one in a series of natural disasters such as Hurricane Andrew which together with the problems in Lloyd's of London have insurance companies running for cover. This paper presents a calibration of the...

Assuming insurable events are generated by a marked point process, this article develops a framework in which insurance markets are dynamically complete in the sense of Kreps (1982). Insurance contracts can then be priced using the techniques of intertemporal finance: the equlibrium price of an...

This paper develops a discrete-time general equilibrium model of insurance using standard techniques of intertemporal finance. The underlying source of uncertainty is modeled as a marked point process. The paper begins by characterizing Walrasian equilibrium on the event tree generated by the...