Syllabus

Title
1218 Risk Management and Insurance
Instructors
Thomas Rauter, M.Sc.
Contact details
  • Type
    PI
  • Weekly hours
    2
  • Language of instruction
    Englisch
Registration
08/24/16 to 09/22/16
Registration via LPIS
Notes to the course
Dates
Day Date Time Room
Wednesday 12/14/16 04:00 PM - 07:00 PM TC.5.04
Thursday 12/15/16 04:00 PM - 07:00 PM TC.4.14
Friday 12/16/16 04:00 PM - 07:00 PM TC.3.07
Monday 12/19/16 04:00 PM - 07:00 PM TC.3.09
Tuesday 12/20/16 04:00 PM - 07:00 PM TC.3.09
Wednesday 12/21/16 04:00 PM - 07:00 PM TC.3.09
Monday 01/09/17 04:00 PM - 07:00 PM TC.3.09
Tuesday 01/10/17 01:00 PM - 04:00 PM TC.4.16

Contents

This course is an introduction to risk and its management by individuals. We discuss how pooling of risk and insurance allow offloading of risk and reducing insolvencies. We then analyse how individuals make choices under uncertainty and their demand for insurance. Finally, we explore the impact of asymmetric information on insurance markets, under the themes of adverse selection and moral hazard. All these topics include discussions of recent developments in insurance markets and some advice for insurance purchase decisions.

Learning outcomes

After completing this course the student will have the ability to:
• Use the concept of risk diversification
• Analyse the probability of default of insurance companies
• Apply normative frameworks to decisions under uncertainty
• Understand the impact of asymmetric information on insurance markets

Apart from that, the course will contribute to the students' ability to:
• Use analytical tools to solve economic problems
• Perform insurance decisions in real life
• Participate in group discussions

Teaching/learning method(s)

Lecture style, market game, problem sets and final exam

Assessment

The maximum number of points in the final exam is 300. Additionally, the eight students achieving the highest earnings in the market game (the top four students from the buyer's group and the top four students from the seller's group) will get 20 extra points. Class attendance and participation will also be taken into account for your final grade / "Note".

Prerequisites for participation and waiting lists

Basics in mathematics

Readings

1 Author: Harrington, Niehaus
Title: Risk Management and Insurance

Edition: 2nd
Remarks: only chapters 1, 3 - 5, 9 and 11 are relevant for the course
Year: 2004
Content relevant for class examination: Yes
Recommendation: Reference literature
Type: Book
2 Author: Eeckhoudt, Gollier, Schlesinger
Title: Economic and Financial Decisions under Risk

Remarks: only chapters 1 and 12 are relevant for the course
Year: 2005
Content relevant for class examination: Yes
Recommendation: Reference literature
Type: Book

Availability of lecturer(s)

Office hours by appointment

Unit details

Unit Date Contents
1 tba Overview of Risk Management, Measures of Risk
2 tba The Impact of Risk Pooling on Variance, Central Limit Theorem, Probability of Insolvency of Insurance Companies
3 tba Expected Value Rule and Demand for Insurance, Expected Utility Rule
4 tba

Indifference Curves and Demand for Insurance

5 tba Risk Premium, What Insurance Should I Buy?, Empirical Anomalies and Psychological Factors
6 tba Market Game on Asymmetric Information, Adverse Selection in Insurance Markets
7 tba Moral Hazard in Insurance Markets
8 tba Final Exam
Last edited: 2016-08-02



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