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Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini
Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini
Research Collection College of Integrative Studies
We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free investment are allowed to differ between the entrepreneurs and the investors, i.e., agents have different opportunity costs of participating in the risky projects. We first show that the presence of asymmetric options establishes links between the risk-free and risky sectors as well as between the real and financial sectors. In particular, an asymmetric …
Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini
Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini
Research Collection College of Integrative Studies
We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free investment are allowed to differ between the entrepreneurs and the investors, i.e., agents have different opportunity costs of participating in the risky projects. We first show that the presence of asymmetric options establishes links between the risk-free and risky sectors as well as between the real and financial sectors. In particular, an asymmetric …