Naples Metro Map on As a result, the premiums charged to applicants exceed the expected value of the gamble. Faced with premiums that are actuarially unfair, even risk-averse individuals may choose to less than fully insure. The amount that risk-averse individuals are willing to pay for insurance, above and beyond the actuarially fair premium, is called the risk premium. Hedging is the use of forward contracts to insure against future price movements. It is commonly used by farmers, who must plant crops well before they know what the price of the crops will be at harvest. In order to eliminate the risk of price fluctuations, farmers may hedge by entering into a forward contract, in which they promise to deliver the crops at a future date in exchange for a price agreed upon today. Farmers wishing to insure against a future price fall contract with crop buyers who wish to insure against a future price rise. Naples Metro Map 2016.
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