Abstract
In this paper we investigate the fair pricing of unemployment insurance policies in a stochastic environment. This will depend on the idiosyncratic risks confronting individual workers and on the risks facing the risk class as a whole. Using an arbitrage pricing argument we show that idiosyncratic risks can be diversified away leaving only market risk to be priced.
Original language | English |
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Pages (from-to) | 7-25 |
Number of pages | 19 |
Journal | European Economic Review |
Volume | 32 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1988 |
Externally published | Yes |