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by spacebanana7
83 days ago
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Extreme events are always poorly priced in markets. For example, there's no point in making a trade for the S&P 500 falling by 90% because if it does we'll be in such a catastrophe that money doesn't matter any more. Insurance / hedging is most useful in protecting you from realistic well defined risks that affect you personally but not the wider system. |
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But a powerful earthquake can't affect the wider system in a country? and yet, people do buy insurances for earthquakes.