Information, Incentives, and Effects of Risk-Sharing on the Real Economy (Summary)

CFA Institute Journal Review summarizes "Information, Incentives, and Effects of Risk-Sharing on the Real Economy," by Mark Liu, Wenfeng Wu, and Tong Yu, published in the Pacific-Basin Finance Journal, October 2019.

Overview
In perfect markets, risk sharing results in a Pareto optimal asset allocation. Transaction costs and information asymmetry can result in risk sharing becoming expensive; furthermore, they can result in taking excessive risks. The authors summarize literature on the topics of risk identification, measurement, and management, focusing especially on the Asia-Pacific region.

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