Learning how to manage risk by hedging: the VOC insurance contract of 1613

TY - JOUR

T1 - Learning how to manage risk by hedging: the VOC insurance contract of 1613

AU - Gelderblom, Oscar

AU - de Jong, Abe

AU - Jonker, Joost

PY - 2019/3/30

Y1 - 2019/3/30

N2 - We examine an unusual contract which the Dutch East India Company (VOC) sold to investors in . 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.

AB - We examine an unusual contract which the Dutch East India Company (VOC) sold to investors in . 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.

UR - http://www.mendeley.com/research/learning-manage-risk-hedging-voc-insurance-contract-1613

U2 - 10.1093/ereh/hez003

DO - 10.1093/ereh/hez003

M3 - Article

SN - 1474-0044

JO - European Review of Economic History

JF - European Review of Economic History

ER -