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This paper adopts a normative approach to catastrophe insurance.
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We consider a pool of bank loans subject to a credit risk and develop a method for decomposing the credit risk into idiosyncratic and systemic components. The systemic component accounts for the aggregate statistical difference between credit defaults in a given period and the long-run average...
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This paper presents an analytical model of underwriting capacity and insurance market equilibrium under an asymmetric corporate tax schedule. It is shown that reinsurance markets enable risk-neutral insurers to allocate tax shields to those firms that have the greatest capacity for utilizing...
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Large systematic risks, such as those arising from natural catastrophes, climatic changes and uncertain trends in longevity increases, have risen in prominence at a societal level and, more particularly, have become a highly relevant issue for the insurance industry. Against this background, the...
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In this paper, we investigate the optimal timing for deep geological disposal of nuclear waste. Our model is based on the real options approach to investment under uncertainty. In this context, the problem is similar to the optimal exercise policy for a perpetual American spread option. The...
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