Journal of Risk and Uncertainty

, Volume 14, Issue 1, pp 25–39 | Cite as

The Interaction Between the Demands for Insurance and Insurable Assets

  • Louis Eeckhoudt
  • Jack Meyer
  • Michael Ormiston


Holding more of the riskless asset and insuring the risky asset are two ways to reduce portfolio risk. These methods can be employed jointly. As a result, the amount of insurance selected to indemnify against possible losses from holding a risky asset depends, in general, on the quantities of the risky and riskless assets held in the portfolio, and vice versa. In decision models where expected utility is maximized, relatively little has been done to integrate these two decisions into a single model. Such a model is formulated in this paper and the interaction between the demand for insurance and the demand for an insurable risky asset is examined.

insurance portfolios expected utility 


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Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Louis Eeckhoudt
    • 1
  • Jack Meyer
    • 2
  • Michael Ormiston
    • 3
  1. 1.Department of EconomicsFUCAMMonsBelgium
  2. 2.Department of EconomicsMichigan State UniversityEast Lansing
  3. 3.Department of EconomicsArizona State UniversityTempe

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