We provide a novel explanation for the low volume of securitization in catastrophe risk transfer. Insurers' risk transfer choices trade off the lower signaling costs of reinsurance against the additional costs of reinsurance stemming from reinsurers' market power, higher costs of capital, and...

We analyze a continuous-time stochastic control problem that arises in the study of several important issues in financial economics. An agent controls the drift and volatility of a diffusion output process by dynamically selecting one of an arbitrary (but finite) number of projects and the...

We provide a novel explanation for the low volume of securitization in catastrophe risk transfer using a signaling model. Relative to securitization, reinsurance features lower adverse selection costs because reinsurers possess superior underwriting resources than ordinary capital market...

We develop a structural model to investigate the effects of asymmetric beliefs and agency conflicts on dynamic principal-agent relationships. Our model differs from previous models by incorporating three key features in a unified framework: (i) asymmetric beliefs and risk attitudes, (ii) actions...

We develop a general equilibrium model of competitive insurance and equity capital markets to show how aggregate asset and insurance liability risks affect insurance prices and regulation. In the unique equilibrium of the benchmark unregulated economy, insurers raise external capital solely by...

We analyze a continuous-time stochastic control problem that arises in the study of several important issues in financial economics. An agent controls the drift and volatility of a diffusion output process by dynamically selecting one of an arbitrary (but finite) number of projects and the...