Riskless Society
Nobel prize winners, Dr. Kenneth Arrow and Gerard Debreu, wrote about a fictional “riskless society”, where eventually the world markets became complete and sophisticated enough that every imaginable risk we have could be mitigated by an insurance. The theorem has led the way to push progress in the risk management sciences. Since their theories were first published, the growth in financial derivatives products has grown exponentially. Investopedia Says:
The theories presented by Arrow and Debreu were based on an assumption of market equilibrium that stands in opposition to much of the empirical evidence the markets provide us. Modern behavioral finance theory attempts to study markets under states of non-equilibrium. Related Terms:
Behavioral Finance
Derivative
Equilibrium
Insurance
Risk Management |