Riskless Society

AAA

DEFINITION of 'Riskless Society'

A fictional society in which the world markets become complete and sophisticated enough that every imaginable risk can be mitigated by insurance. The notion of the riskless society was deveopled by Dr. Kenneth Arrow and Gerard Debreu, which has led the way to further progress in the risk management sciences.

INVESTOPEDIA EXPLAINS 'Riskless Society'

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 with. Modern behavioral finance theory attempts to study markets under states of non-equilibrium.

Debreu won the Nobel Memorial Prize for this work in 1983. Since Arrow and Debreu's work was first published, the prevalence of financial derivatives products has grown exponentially.

RELATED TERMS
  1. Equilibrium

    The state in which market supply and demand balance each other ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. Derivative

    A security whose price is dependent upon or derived from one ...
  4. Insurance

    A contract (policy) in which an individual or entity receives ...
  5. Risk Management

    The process of identification, analysis and either acceptance ...
  6. Outcome Bias

    A decision based on the outcome of previous events without regard ...
Related Articles
  1. What Is Market Efficiency?
    Active Trading

    What Is Market Efficiency?

  2. Are Derivatives A Disaster Waiting To ...
    Options & Futures

    Are Derivatives A Disaster Waiting To ...

  3. Are Derivatives Safe For Retail Investors?
    Options & Futures

    Are Derivatives Safe For Retail Investors?

  4. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center