One reaction to proposals for new markets is that the general public will not want to deal in them, because of some psychological inability to appreciate the benefits that the risk management may offer—such a reaction is often given by people in the futures and options industry, who have seen many innovative contracts fail. The general public, it is asserted, will not trade directly in such futures, and if the reason they will not is that they do not appreciate the benefits of risk management, then it may be difficult for retailers of risk‐management services to repackage the contracts in a form that will interest them. However, the general public, including both individuals and firms, does use some risk‐management services, notably insurance policies—the insurance industry has not failed to market risk‐management policies to the general public, rather, their success has been highly variable. This chapter investigates whether the macro markets proposed by the book resemble the life insurance policies (for which there is a ready market), or whether they more resemble the disability or flood insurance markets or farmers’ hedging markets. This is done by analysing the psychological literature on demand for insurance. The issue of promoting proper public use of macro markets (by public education and proper product design) is also discussed.
Keywords: contracts, demand for insurance, disability insurance market, farmers’ hedging markets, flood insurance market, futures markets, general public, hedging markets, insurance market, life insurance market, macro markets, new markets, options, psychological barriers, psychological inability, public use of macro markets, risk management
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