Insurance, Flexibility and Non-contingent Trades
This paper considers non-contingent trades through either forward markets or simple contracts. The point of the inquiry is to understand the costs and beneﬁts of trades of this nature. We focus on the tradeoﬀ between insurance (a beneﬁt) and the loss of flexibility in decisions (a cost) as determining properties of trading in forward markets. This tradeoﬀ is also used to explore contract length.
Cooper, Russell, "Insurance, Flexibility and Non-contingent Trades" (1984). Cowles Foundation Discussion Papers. 924.