This paper analyzes the potential trade offs and complementarities that exist between intra-year strategies employing annual price and yield risk contracts and inter-year self-insurance strategies involving intertemporal consumption substitution and borrowing, and explores whether standard crop insurance contracts can be made more useful to farmers if offered with a multiple-year horizon. —————...

People face heterogeneous health shocks and medical spending risks. Using a rich dynamic structural life-cycle model, this paper investigates how these shocks a¤ect the savings behavior of retired single households. Consumers are allowed to respond to health shocks in two different ways: they can directly pay for their health care expenses (self-insure) or they can rely on health insurance cont...

Dynamic hybrid life insurance products are intended to meet new consumer needs regarding stability in terms of guarantees as well as sufficient upside potential. In contrast to traditional participating or classical unit-linked life insurance products, the guarantee offered to the policyholders is achieved by a periodical rebalancing process between three funds: the policy reserves (i.e. the pr...

Abstract. We analyse contracts which pay out a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified on the basis of a benchmark portfolio. These contracts are closely related to unit–linked life–insurance/savings plan products and can be considered as alternatives to a direct investment in the underlying benchmark portfolio. The option embedded into the...

example, which ranked second highest in terms of per capita income, grants amounted to $46.51 per capita compared with $18.38 for the continental United States; 50 percent of the total grants to the State went for highway construction. Similarly, in the middle-income group, Wyoming received $34.87 per capita in grants, and 48 percent of all grants was for highways. New Mexico, among the low-inc...

This paper sets up a model for the valuation of traditional participating life insurance policies. These claims are characterized by their explicit interest rate guarantees and by various embedded option elements, such as bonus and surrender options. Owing to the structure of these contracts, the theory of contingent claims pricing is a particularly well-suited framework for the analysis of the...

This paper provides a new approach for pricing and hedging popular highly pathdependent equity-linked contracts. We illustrate our technique with two examples: the locally-capped contracts (a popular design on the exchange-listed retail investment contracts on the American Stock Exchange) and the Cliquet option (extensively sold by insurance companies). Wilmott [17] describes these types of con...

Established in 1984, the Wharton Risk Management and Decision Processes Center develops and promotes effective corporate and public policies for low‐probability events with potentially catastrophic consequences through the integration of risk assessment, and risk perception with risk management strategies. Natural disasters, technological hazards, and national and international security issues ...

This is correct if efficiency is defined in terms of labor effort, as the landlord’s share operates like a tax on the returns to a tenant’s effort. However, sharecropping provides insurance to the tenant against fluctuations in crop yield arising from reasons beyond his control, so if this insurance effect is incorporated also in the notion of efficiency then they need not be less efficient tha...

We study the effect of secondary markets on equity-linked life insurance contracts with surrender guarantees. The policyholders are assumed to be boundedly rational in giving up their contracts, and a proportion of policyholders will access the secondary markets instead of surrendering the contracts to the insurance company. We formulate the valuation problems from both the insurance company’s ...