Catastrophe Futures: Financial Markets and Changing Climate Risks

摘要: An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about distribution risks across population. We study financial markets that suffice to reach efficient allocations in this situation. The problem is formalized general equilibrium with incomplete markets. Introducing array mutual insurance policies and "statistical securities" shown lead Pareto allocations. By combining contract for securities collective risks, proposed institutional framework economizes significantly on number required efficiency. computational complexity market reduced from NP - complete (i.e. intractable) one which depends polynomially households.