%0 Journal Article
%T A Welfare Analysis of Capital Insurance
%A Ekaterina Panttser
%A Weidong Tian
%J Risks
%D 2013
%I MDPI AG
%R 10.3390/risks1020057
%X This paper presents a welfare analysis of several capital insurance programs in a rational expectation equilibrium setting. We first explicitly characterize the equilibrium of each capital insurance program. Then, we demonstrate that a capital insurance program based on aggregate loss is better than classical insurance, when big financial institutions have similar expected loss exposures. By contrast, classical insurance is more desirable when the bankĄ¯s individual risk is consistent with the expected loss in a precise way. Our analysis shows that a capital insurance program is a useful tool to hedge systemic risk from the regulatory perspective.
%K capital insurance
%K welfare
%K equilibrium
%U http://www.mdpi.com/2227-9091/1/2/57