A Welfare Analysis of Capital Insurance

Risks

Ekaterina Panttser¹ 

[1] Belk College of Business, University of North Carolina at Charlotte, Charlotte, NC 28223, USA; E-Mail

关键词: capital insurance;    welfare;    equilibrium;   

DOI  :  10.3390/risks1020057

来源: mdpi

【 摘 要 】

This paper presents a welfare analysis of several capital insurance programs in a rational expectation equilibrium setting. We first explicitly characterize the equilibrium of each capital insurance program. Then, we demonstrate that a capital insurance program based on aggregate loss is better than classical insurance, when big financial institutions have similar expected loss exposures. By contrast, classical insurance is more desirable when the bank’s individual risk is consistent with the expected loss in a precise way. Our analysis shows that a capital insurance program is a useful tool to hedge systemic risk from the regulatory perspective.

【 授权许可】

CC BY   
© 2013 by the authors; licensee MDPI, Basel, Switzerland.