infonet-economy

Model builders face ambiguity about the true data generating process. Consequently, they need to deal with ambiguity attitudes (inside uncertainty) and ambiguous financial reality (outside uncertainty) when developing and estimating financial models. We introduce a novel approach for systematically dealing with outside uncertainty in addition to inside uncertainty in a tractable way...

Following the idea of heterogeneous firms we examine responses to trade liberalization at the firm level in the presence of capital market imperfections. In our model, entrepreneurs differ in their wealth endowment, causing them to rely differently on external funds. With an imperfect capital market, we show that poor entrepreneurs run smaller firms, are less likely to invest in R...

Ziel der vorliegenden Studie ist es, den Debit- und Kreditkartenbestand und -umsatz auf der Basis von neuesten Daten zu prognostizieren sowie die neuesten Trends im Schweizer Zahlungskartenmarkt zu beleuchten. Die Bargeldsubstitution hat durch die Debit- und Kreditkarte weiter zugenommen, wobei von der Debitkarte ein stärkerer Effekt ausgeht. Das Wachstum der Kartenumsätze und -...

This paper demonstrates the presence of adverse selection in the group insurance market for policies that allow no individual choice. As a "conventional wisdom," group insurance mitigates adverse selection, since individual choice is minimized and group losses have less variability than individual losses. We complement this "conventional wisdom" by analyzing a...

This paper analyzes the equity risk module of Solvency II, the new regulatory framework in the European Union. The equity risk module contains a symmetric adjustment mechanism called equity dampener which shall reduce procyclicality of capital requirements and thus systemic risk in the insurance sector. We critically review the equity risk module in three steps: we first analyze the...

This paper reviews the extant research on systemic risk in the insurance sector and outlines new areas of research in this field. We summarize and classify 43 theoretical and empirical research papers from both academia and practitioner organizations. The survey reveals that traditional insurance activity in the life, non-life, and reinsurance sectors neither contributes to systemic...

We study retail deposit withdrawals from commercial banks which were
differentially exposed to distress during the 2007-2009 financial crisis. We show that the propensity of households to withdraw deposits increases with the severity of bank distress. Withdrawal risk is, however, substantially mitigated by strong bank-client relationships. Considering the most distressed bank...

Public attention has focused on how the launch of the national health exchanges could impact the types of risks who initially enroll and thereby affect future premiums and enrollment. We introduce simple dynamics into a standard model of insurance under adverse selection to show that such "initial conditions" can indeed matter. When firms are price-takers, the market can...