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Risk Preferences Necessary to Choose Life Insurance Funding of Buy-Sell Arrangements
Abstract
Pratt-Arrow risk aversion coefficients are derived such that term life insurance funding of buy-sell arrangements is preferred by decision makers with risk preferences greater than those breakeven coefficients. Given previous estimates of farmers' risk preferences, anything greater than a 25 percent loading of actuarially fair premiums would discourage life insurance funding.
Date Issued
1985-07Publisher
Charles H. Dyson School of Applied Economics and Management, Cornell University
Type
article