The stochastic analysis of competitive unemployment insurance premiums

David Blake*, Michael Beenstock

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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 languageEnglish
Pages (from-to)7-25
Number of pages19
JournalEuropean Economic Review
Volume32
Issue number1
DOIs
StatePublished - Jan 1988
Externally publishedYes

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