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    Risk-sharing and probabilistic network structure

    Pelliccia, Marco (2012) Risk-sharing and probabilistic network structure. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    This paper studies the impact of a probabilistic risk-sharing network structure on the optimal portfolio composition. We show that, even assuming identical agents, we are able to differentiate their optimal risk-choice once we assume the link-structure defining their relationship probabilistic. In particular, the final agent's portfolio composition is function of his location in the network. If we assume positive asset-correlation coefficients, the relative location of a player in the graph influences his risk-behaviour as much as those of his direct and indirect partners in a not-straightforward way. We analyse also two potential "centrality measures" able to select the key-player in the risk-sharing network. The findings may help to select the "central" agent in a risk-sharing community and to forecast the risk-exposure of the players. Finally, this paper may explain natural differences between identical rational agents' choices emerging in a probabilistic network setup.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): informal insurance, risk-sharing, network
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 11 Jan 2013 11:17
    Last Modified: 26 Jul 2019 17:43
    URI: http://eprints.bbk.ac.uk/id/eprint/5945

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