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- Title
Learning how to manage risk by hedging: the VOC insurance contract of 1613.
- Authors
Gelderblom, Oscar; Jong, Abe de; Jonker, Joost
- Abstract
We examine an unusual contract which the Dutch East India Company (VOC) sold to investors in 1613. The firm was in a position as modelled by Froot, Scharfstein and Stein for modern corporations: facing heavy, strategic investment, about to reap the benefits, but unable to attract the necessary capital. Hedging or insurance then makes sense to safeguard continued operations. Understanding this, the VOC directors took out insurance on incoming cash from return cargoes. We analyze the contract's price and underwriters and contrast the VOC's single use of this peculiar instrument with the English East India Company's later repeated application.
- Subjects
HEDGING (Finance); NEDERLANDSCHE Oost-Indische Cie.; RISK management in business; INVESTMENTS; INSURANCE
- Publication
European Review of Economic History, 2020, Vol 24, Issue 2, p332
- ISSN
1361-4916
- Publication type
Article
- DOI
10.1093/ereh/hez003