Financial Economics of Risk and Insurance

(3 Credits)

This course examines how insurers and financial markets price, pool, transfer, and manage risk. We analyze insurer value creation via risk transformation and asset-liability management, exploring market frictions (adverse selection, moral hazard, ambiguity, behavioral factors, regulation) through theory and case studies. We also cover innovative approaches to managing major tail risks—stemming from financial crises, climate change, longevity trends, and technological disruption—using tools like reinsurance, catastrophe bonds, and public/private partnerships. The course prepares students for diverse risk roles at insurers, reinsurers, specialized asset managers, emerging FinTech/InsurTech ventures, risk consulting firms, and corporate risk management.