Working Papers, Department of Economics, Lund University
Risk Exchange as a Market or Production Game
() and Sjur Flåm
Abstract: Risk exchange is considered here as a cooperative game
with transferable utility. The set-up fits markets for insurance,
securities and contingent endowments. When convoluted payoff is concave at
the aggregate endowment, there is a price-supported core solution. Under
variance aversion the latter mirrors the two-fund separation in allocating
to each agent some sure holding plus a fraction of the aggregate.
Keywords: securities; mutual insurance; market or production games; transferable utility; extremal convolution; core solutions; variance or risk aversion; two-fund separation; CAPM; (follow links to similar papers)
JEL-Codes: C61; G11; G12; G13; (follow links to similar papers)
27 pages, October 8, 2007
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