Extending the risk analysis model to include market-insurance

This paper presents an extension to the risk analysis model that includes t he use of market insurance in the risk management process. This is accompli shed by integrating the state-preference model from the financial literatur e with the risk analysis model from the MIS literature. The extended model predicts, and evidence is presented, as to a substitute good relationship b etween residual risk and controls/market insurance and a complementary good relationship between controls and market insurance.