Catastrophic risk

Catastrophic Risk Evaluation

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Catastrophic medical expenditure risk.

We propose a measure of household exposure to particularly onerous medical expenses. The measure can be decomposed into the probability that medical expenditure exceeds a threshold, the loss due to predictably low consumption of other goods if it does and the further loss arising from the volatility of medical expenses above the threshold. Depending on the choice of threshold, the measure is co...

Risk averse decision making under catastrophic risk

A nonstandard probabilistic setting for modeling of the risk of catastrophic events is presented. It allows random variables to take on infinitely large negative values with non-zero probability, which corresponds to catastrophic consequences unmeasurable in monetary terms, e.g. loss of human lives. Thanks to this extension, the safety-first principle is proved to be consistent with traditional...

Parimutuel Insurance for Hedging against Catastrophic Risk

This paper examines whether parimutuels can hedge risk-averse people against catastrophic losses. Two optimal stake choice models are constructed. In the first model, where stakes of other players are exogenous, the dynamic optimal hedge is obtained. In the second model, the equilibrium of stake is derived by maximizing the representative agent’s expected utility. Given no transaction cost, par...

Catastrophic Risk Management and Economic Growth