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:...

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...

In this paper we investigate the risk sharing potential of financial intermediaries in an overlapping generations economy. We find that the intermediaries' allocations are constrained by the temptation of the living to liquidate their intermediary's assets and share the proceeds amongst...