We investigate the effects of regulatory restrictions on the amounts invested in risky asset classes in life insurance funds across EU countries. By estimating a panel data econometric model, we find that these restrictions have an economically and statistically significant negative impact on...

How does the value of life affect annuity demand? To address this question, we construct a portfolio choice problem with three key features: i) agents have access to life-contingent assets, ii) they always prefer living to dying, iii) agents have non-expected utility preferences. We show that as...

In this paper I consider a portfolio optimization problem where an agent holds an endowment of stock and is allowed to buy some quantity of a put option on the stock. This basic question (how much insurance to buy?) has been addressed in insurance economics through the literature on rational...

I analyze a portfolio optimization problem where an agent holds an endowment of stock and is allowed to buy some quantity of a put option on the stock. My model rephrases a fundamental question from insurance economics: how much coverage should a risk averse agent buy? Classic studies of...

In a recently reprinted paper Borch wonders whether an increase in loadings, together with a consequent increase in deductibles, may start a vicoius circle, ad infinitum. This paper rules out the possibility of a vicious circle, in a model à la Borch. First of all, in his setting, increases in...

Consider an agent who holds a stock, but is allowed to buy and hold some quantity of at-the-money put options on the stock. Such an agent must decide the optimal use of financial derivatives under trade restrictions. This paper uses simulation to compare the optimal quantity when the agent...

How does the value of life affect annuity demand? To address this question, we construct a portfolio choice problem with three key features: i) agents have access to life-contingent assets, ii) they always prefer living to dying, iii) agents have non-expected utility preferences. We show that as...

The cost of operational risk refers to the capital needed to afford the loss generated by ordinary activities of a firm. In this work we demonstrate how allocation principles can be used to the subdivision of the aggregate capital so that the firm can distribute this cost across its various...

This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPV-consistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it...

How does the value of life affect annuity demand? To address this question, we construct a portfolio choice problem with three key features: i) agents have access to life-contingent assets, ii) they always prefer living to dying, iii) agents have non-expected utility preferences. We show that as...