or long-term unemployment, may occur during working years. Personal disaster risk alters lifetime ex-ante investment …This paper examines households' self-insurance in financial markets when a rare personal disaster, such as disability … choices, even if most workers will not experience a disaster. Uncertainty about the size of human capital losses, which …

potentially large permanent shock to earnings. Personal disaster risk allows to match moderate risk-taking of young investors and … personal disaster, such as long-term unemployment or disability, during working years. Such a disaster entails an uncertain but … a flat investment profile in age, observed in the United States, when the calibration of both the disaster probability …

To effectively cope with an unexpected, large, and negative income shock, I propose a life-cycle model for income risk … generalizing the Arrow-Debreu price with income risk premium …

Formal dynamic analyses of household portfolio choice in the literature focus on holdings of equity and a risk … riskless short-term bond— and are exposed to uninsurable idiosyncratic risk through nonfinancial income as well as aggregate … risk through the asset returns. An application shows that the low Treasury returns observed in the US between 2009 and 2013 …

labor-income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle …, middle-income households reduce (controllable) financial risk. Richer households, having less pressure, can afford more risk …-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption. …