COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 691

"Insurance, Flexibility and Non-Contingent Trades"

Russell Cooper

February 1984

This paper considers non-contingent trades through either forward markets or simple contracts. The point of the inquiry is to understand the costs and benefits of trades of this nature. We focus on the tradeoff between insurance (a benefit) and the loss of flexibility in decisions (a cost) as determining properties of trading in forward markets. This tradeoff is also used to explore contract length.