Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103616
Authors: 
Panttser, Ekaterina
Tian, Weidong
Year of Publication: 
2013
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Publisher:] MDPI [Place:] Basel [Volume:] 1 [Year:] 2013 [Issue:] 2 [Pages:] 57-80
Abstract: 
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.
Subjects: 
capital insurance
welfare
equilibrium
JEL: 
G11
G12
G13
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
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