Modelling stochastic mortality for dependent lives

Author(s):

Jaap Spreeuw

 et al.

This paper is a first attempt to model the mortality risk of couples of individuals, according to the stochastic intensity approach.

Updated: 22/09/2011
Comments:
Views: 3,616

Stochastic processes induced by Dirichlet (B-) splines: modelling multivariate asset price dynamics

We consider a new class of processes, called LG processes, defined as linear combinations ofindependent gamma processes. Their distributional and path-wise properties are explored by following their relation to polynomial and Dirichlet (B-) splines. In particular, it is shown that the density of an LG process can be expressed in terms of Dirichlet (B-) splines, introduced independently by Ignatov and Kaishev (1987, 1988, and 1989) and Karlin et al. (1986).

Updated: 22/09/2011
Comments:
Views: 4,653

Insurance solvency under parameter uncertainty

Financial institutions such as insurance companies or banks are regulated according to a Value-at-Risk principle. This means that they have to hold enough capital, such that their probability of becoming insolvent over a fixed time horizon (e.g. 1 year) is very low (e.g. at most 0.5%). Calculation of the required capital according to this principle stumbles on the quite fundamental difficulty of estimating the probability of very extreme scenarios based on limited data sets.

Updated: 22/09/2011
Comments:
Views: 8,524

Stochastic claims reserving in general insurance

Claims reserves are held by insurance companies so that they have sufficient funds to pay claims when they are submitted by policyholders. In general insurance, insurance policies usually last for a year; the policyholder pays an upfront premium and then expects any claims to be met - no matter when they are made. The problem for insurers is that there is often a delay before the claims are arrive, and then a further delay before they are paid.

Updated: 24/01/2013
Comments:
Views: 15,053

Insurance, systemic risk and the financial crisis

Author(s):

Faisal Baluch

 et al.

In this paper we assess the impact of the financial crisis on insurance markets and the role of the insurance industry in the crisis itself.

Updated: 14/07/2014
Comments: 3
Views: 8,501

To split or not to split: capital allocation with convex risk measures

Convex risk measures were introduced by Deprez and Gerber (1985). Here the problem of allocating risk capital to subportfolios is addressed, when aggregate capital is calculated by a convex risk measure. The Aumann-Shapley value is proposed as an appropriate allocation mechanism. Distortion-exponential measures are discussed extensively and explicit capital allocation formulas are obtained for the case that the risk measure belongs to this family. Finally the implications of capital allocation with a convex risk measure for the stability of portfolios are discussed.

Updated: 22/09/2011
Comments:
Views: 3,897

Risk measures and theories of choice

We discuss classes of risk measures in terms both of their axiomatic definitions and of the economic theories of choice that they can be derived from. More specifically, expected utility theory gives rise to the exponential premium principle, proposed by Gerber (1974), Dhaene et al. (2003), whereas Yaari's (1987) dual theory of risk can be viewed as the source of the distortion premium principle (Denneberg (1990), Wang (1996).

Updated: 22/09/2011
Comments:
Views: 3,869

Optimal capital allocation principles

This paper develops a unifying framework for allocating the aggregate capital of a financial firm to its business units.

Updated: 03/11/2011
Comments:
Views: 3,330

Froot and Stein revisited once again

Author(s):

Jens Nielsen

 et al.

In this paper we show that the economic intuition behind the paper of Froot and Stein (1998) is correct and that their result can be obtained when the market is reformulated in a discrete time setting.

Updated: 22/09/2011
Comments:
Views: 4,462