Off-campus UNL users: To download campus access dissertations, please use the following link to log into our proxy server with your NU ID and password. When you are done browsing please remember to return to this page and log out.
Non-UNL users: Please talk to your librarian about requesting this dissertation through interlibrary loan.
Using the financial markets to hedge the risk of unemployment in the offering of a private unemployment insurance product
Abstract
Unemployment in the United States economy is a cyclical phenomenon. The rising and falling levels of national output result in unemployment uncertainty, and income insecurity. The purpose of unemployment insurance is to relieve this income insecurity. The purpose of this study is to determine whether or not it is viable to finance unemployment insurance privately with the use of a financial markets hedge. A basic premise of this study is that the cyclical fluctuations of unemployment are not an isolated phenomenon. This cyclical behavior is shared with other macroeconomic variables in the economy, including financial variables. The financial variable used in this study is the 90-day T-bill rate. The hedging instrument that is used in this study is the futures contract on the 90-day T-bill. This study was conducted by simulating a private unemployment insurance contract for the years 1978 through 1987. By using this hedging instrument, in such a way as to account for the lagged correlation between the unemployment rate and the 90-day T-bill rate, the variance of unemployment insurance reserves can be reduced by up to fifty-three percent. Such a reduction in the variability of reserves will make the management of an unemployment insurance program less risky, and a private program more viable.
Subject Area
Finance
Recommended Citation
Haley, Joseph Donald, "Using the financial markets to hedge the risk of unemployment in the offering of a private unemployment insurance product" (1990). ETD collection for University of Nebraska-Lincoln. AAI9030121.
https://digitalcommons.unl.edu/dissertations/AAI9030121