Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62188
Authors: 
Schulz, Rainer
Year of Publication: 
2000
Series/Report no.: 
Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,93
Abstract: 
People dislike inflation because inflation erodes the real value of future nominal income and wealth. Adjustment of future nominal values via a cost of living index is an appropriate way to handle the problem of real income risk. Nonetheless an important aspect needs more discussion: If markets existed in which real income risks could be traded-would a rational individual always voluntarily purchase protection against such risk? A model is developed to shed some light on this aspect. It shows that the optimal behaviour depends - as expected - on the cost of protection and the risk preferences of the individual.
Subjects: 
Cost of Living Index
Futures Markets
JEL: 
D11
D8
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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