The Impact of Index-Based Insurance on Informal Risk-Sharing Arrangement.

2014 ◽  
Author(s):  
Steve Boucher ◽  
Matthieu Delpierre
Keyword(s):  
Risk Sharing ◽  
The Impact ◽  
Informal Risk Sharing

Risk-Taking and Risk-Sharing Incentives under Moral Hazard

2014 ◽  
Vol 6 (1) ◽  
pp. 58-90 ◽  
Author(s):  
Mohamed Belhaj ◽  
Renaud Bourlès ◽  
Frédéric Deroïan
Keyword(s):  
Developing Countries ◽  
Moral Hazard ◽  
Risk Taking ◽  
Risk Sharing ◽  
Investment Risk ◽  
Two Agents ◽  
The Impact ◽  
Informal Risk Sharing ◽  
Risky Technology ◽  
Level Of Risk

This paper explores the effect of moral hazard on both risk-taking and informal risk-sharing incentives. Two agents invest in their own project, each choosing a level of risk and effort, and share risk through transfers. This can correspond to farmers in developing countries, who share risk and decide individually upon the adoption of a risky technology. The paper mainly shows that the impact of moral hazard on risk crucially depends on the observability of investment risk, whereas the impact on transfers is much more utility dependent. (JEL D81, D82, D86, G22)

scholarly journals How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

2021 ◽  
Vol 6 (1) ◽  
pp. 238146832199040
Author(s):  
Gregory S. Zaric
Keyword(s):  
Risk Sharing ◽  
Financial Risk ◽  
Unintended Consequences ◽  
Drug Costs ◽  
New Drugs ◽  
Total Drug ◽  
Number Of Patients ◽  
Clinical Benefits ◽  
The Impact ◽  
Mean Variance

Background. Pharmaceutical risk sharing agreements (RSAs) are commonly used to manage uncertainties in costs and/or clinical benefits when new drugs are added to a formulary. However, existing mathematical models of RSAs ignore the impact of RSAs on clinical and financial risk. Methods. We develop a model in which the number of patients, total drug consumption per patient, and incremental health benefits per patient are uncertain at the time of the introduction of a new drug. We use the model to evaluate the impact of six common RSAs on total drug costs and total net monetary benefit (NMB). Results. We show that, relative to not having an RSA in place, each RSA reduces expected total drug costs and increases expected total NMB. Each RSA also improves two measures of risk by reducing the probability that total drug costs exceed any threshold and reducing the probability of obtaining negative NMB. However, the effects on variance in both NMB and total drug costs are mixed. In some cases, relative to not having an RSA in place, implementing an RSA can increase variability in total drug costs or total NMB. We also show that, for some RSAs, when their parameters are adjusted so that they have the same impact on expected total drug cost, they can be rank-ordered in terms of their impact on variance in drug costs. Conclusions. Although all RSAs reduce expected total drug costs and increase expected total NMB, some RSAs may actually have the undesirable effect of increasing risk. Payers and formulary managers should be aware of these mean-variance tradeoffs and the potentially unintended results of RSAs when designing and negotiating RSAs.

ENHANCING THE RESILIENCE OF NETWORKED AGENTS THROUGH RISK SHARING

2013 ◽  
Vol 16 (04n05) ◽  
pp. 1350006 ◽  
Author(s):  
AKIRA NAMATAME ◽  
HOANG ANG Q. TRAN
Keyword(s):  
Risk Sharing ◽  
Large Scale ◽  
Point Of View ◽  
Dark Side ◽  
Economic Systems ◽  
External Shocks ◽  
Dangerous Place ◽  
Design Systems ◽  
System Resilience ◽  
The Impact

Since social-economic systems increase interdependency, a crucial question arises: Is an interconnected world a safer or a more dangerous place to live? Over the last few years, we have witnessed the dark side of increasing interdependencies. As such, there is a growing need to focus on how to mitigate networked risk and to enhance the system resilience to the impact of a large-scale shock. The traditional engineering approach has been to design systems that are less vulnerable to damage from hazard events. On the other hand, system resilience is the ability to recover from failure and provide the continuity of system function. The goal of the present paper is to investigate the gain from risk sharing. We propose a mechanism of risk sharing that may enhance the resilience of the networked systems. The proposed risk sharing protocols are based on coordinated incentives of agents to survive collectively by absorbing external shocks. The key issue we would like to analyze is how the gain from risk sharing depends on the capacity of each agent to absorb shock and on the interconnections patterns among agents with risk sharing rules. We demonstrate that risk sharing is beneficial from a systems point of view when the agents' capacities to shocks is high and detrimental when it is low. In particular, we evaluate the effectiveness of risk sharing in two domains. In the first domain, in which networked agents have the possibility of cascading failure, risk sharing is useful in mitigating systemic failure, especially if the agents are running at high load. In the second domain, we evaluate the ratio of safe agents who invest in risky portfolios or projects collectively. In this case, risk sharing is only beneficial if the agents' risk absorbing capacity is high.

scholarly journals A note on Gollier's model for a collective pension scheme

2020 ◽  
pp. 1-25
Author(s):  
Johannes M. Schumacher
Keyword(s):  
Risk Sharing ◽  
Infinite Horizon ◽  
Effective Rate ◽  
Pension Scheme ◽  
Black Scholes ◽  
Investment Returns ◽  
Relative Attractiveness ◽  
Participation Constraint ◽  
Ownership Rights ◽  
The Impact

Abstract Gollier proposed in 2008 a model for the analysis of pension schemes that is helpful to focus attention on the impact of intergenerational risk sharing and on the role of the participation constraint. He uses the model to analyze the relative attractiveness of a collective scheme with respect to schemes that may be implemented by individuals for themselves. The analysis makes use of an assumption concerning the ownership rights of investment returns realized by generations that are between career start and retirement at the time of the transition from an individual to a collective system. The present paper investigates the consequences of adopting an alternative assumption. In a calibration exercise, the increase of the effective rate of return obtained by switching from an existing ‘autarky’ scheme to an infinite-horizon ‘collective’ scheme is found to be 8 basis points, as opposed to 72 basis points as reported by Gollier. Additionally, the effects are considered of changes in the specification of agents' preferences, aiming to express the specific nature of retirement income provision in the second pillar. The Black–Scholes assumptions are used to model the economic environment, so that many results can be obtained in closed form.

scholarly journals Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution

2014 ◽  
Vol 104 (1) ◽  
pp. 183-223 ◽  
Author(s):  
William Jack ◽  
Tavneet Suri
Keyword(s):  
Transaction Costs ◽  
Risk Sharing ◽  
Transactions Costs ◽  
Mobile Money ◽  
The Impact

We explore the impact of reduced transaction costs on risk sharing by estimating the effects of a mobile money innovation on consumption. In our panel sample, adoption of the innovation increased from 43 to 70 percent. We find that, while shocks reduce consumption by 7 percent for nonusers, the consumption of user households is unaffected. The mechanisms underlying these consumption effects are increases in remittances received and the diversity of senders. We report robustness checks supporting these results and use the four-fold expansion of the mobile money agent network as a source of exogenous variation in access to the innovation. (JEL E42, G22, O16, O17, Z13)

scholarly journals DEPOSIT AND FINANCING INSTRUMENTS THROUGH WAQF BANK FOR FOSTERING REAL ECONOMY AND SOCIAL SUSTAINABILITY

2019 ◽  
Vol 4 (2) ◽  
pp. 611
Author(s):  
Muhammad Ridhwan Ab. Aziz ◽  
Mohd Asyraf Yusof
Keyword(s):  
Economic Development ◽  
Risk Sharing ◽  
Global Financial Crisis ◽  
Government Expenditure ◽  
Social Sustainability ◽  
Islamic Finance ◽  
Real Economy ◽  
Financial Products ◽  
Muslim Countries ◽  
The Impact

During the global financial crisis and its aftermath, Islamic financial institutions were less affected, protected by their fundamental operating principles of risk sharing and the avoidance of leverage and speculative financial products. This has led to a greater appreciation of the role of Islamic finance in supporting economic growth across the globe. The contribution of Islamic finance and Islamic social finance especially through waqf sector promotes real economic development and could help to foster real economy and social sustainability.� The impact and contribution of waqf for economic development in fostering real economy and social sustainability can be obverved in many areas such as enhancing economic progress, eradicating proverty, restoring distribution of income, reducing government expenditure, preventing deficit financing and stimulate growth and job creation. Therefore, a new mechanism is needed to support non-bankable and poor customers for financing facilities via Shariah compliant Islamic financial products and services.The purpose of this paper is to examine the most feasible mechanism for deposit and financing instruments based on waqf through Waqf Bank that able to foster and stimulate economic and social sustainability in the real economy sector especially for Muslim countries. The methodology of research in this study is through qualitative research based on interviews with Muslim scholars as well as Islamic banking and waqf practitioners. The finding of this study shows that there is feasible mechanism and modus operandi for the development of deposit and financing instruments in the Waqf Bank that able to be applied in many Muslim countries worldwide.

Sign in / Sign up

Export Citation Format

Share Document