Title :
Liquidity risks and demands for earthquake insurances
Author :
Onishi, Masamitsu ; Yokomatsu, Muneta ; Kobayashi, Kiyoshi
Author_Institution :
Dept. of Urban Manage., Kyoto Univ., Japan
Abstract :
In this paper, a three-period model with debt overhang is proposed to analyze the mechanism that a risk-neutral firm calls for earthquake insurance. If the firm needs to make an additional investment to continue operation due to an earthquake, the firm must procure liquidity assets immediately. However, the firm may confront debt-overhang problem, which mean that the firm cannot procure for the additional investment. This paper shows earthquake insurance can alleviate such a debt-overhang problem.
Keywords :
commerce; insurance; debt overhang; debt-overhang problem; earthquake insurance; earthquake insurances; liquidity assets; liquidity demands; liquidity risks; risk-neutral firm; three-period model; Earthquake engineering; Electric shock; Engineering management; Fluctuations; Insurance; Investments; Risk analysis; Risk management; Security; Systems engineering and theory; debt-overhang problem; earthquake insurance; liquidity risk; risk-neutral firm;
Conference_Titel :
Systems, Man and Cybernetics, 2005 IEEE International Conference on
Print_ISBN :
0-7803-9298-1
DOI :
10.1109/ICSMC.2005.1571149
