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Insurance & Risk Management
2. Chapter 2: Insurance and Risk/Insurance and Hedging Compared
2. Chapter 2: Insurance and Risk Illustration
Syllabus Slides

Insurance and Hedging Compared

01.Core Concepts

Insurance Risk is transferred by a contract Involves the transfer of pure (insurable) risks Moral hazard and adverse selection are more severe problems for insurers Hedging Risk is transferred by a contract Involves risks that are typically uninsurable Fewer problems of moral hazard and adverse selection for entities who buy or sell futures contracts