2017 September - 19 articles
We propose an integrated approach straddling the actuarial science and the mathematical finance approaches to pricing a default-risky catastrophe reinsurance contract. We first apply an incomplete-market version of the no-arbitrage martingale pricing...
After financial crisis, the role of uncertainty in decision making processes has largely been recognized as the new variable that contributes to shaping interest rates and bond prices. Our aim is to discuss the impact of ambiguity on bonds interest r...
Over the last decade, researchers, practitioners, and regulators have had intense debates about how to treat the data collection threshold in operational risk modeling. Several approaches have been employed to fit the loss severity distribution: the...
Energy commodities and their futures naturally show cointegrated price movements. However, there is empirical evidence that the prices of futures with different maturities might have, e.g., different jump behaviours in different market situations. Ob...
Means-tested pension policies are typical for many countries, and the assessment of policy changes is critical for policy makers. In this paper, we consider the Australian means-tested Age Pension. In 2015, two important changes were made to the popu...
We reconsider costs in insurance, and suggest a new type of cost function, which we argue is a natural choice when there are relatively small, but frequent, claims. If a fixed cost is incurred each time a claim is made, we obtain a Pareto optimal ded...
In this work, we focus on volatility estimation which plays a crucial role in risk analysis and management. In order to improve value at risk (VaR) forecasts, we discuss the concept of low price effect and introduce the low price correction which doe...
In this paper, the multivariate fractional trading ansatz of money management from Vince (Vince 1990) is discussed. In particular, we prove existence and uniqueness of an “optimal f” of the respective optimization problem under reasonable assumptions...
We derive a closed form expression for the probability that a non-decreasing, pure jump stochastic risk process with the order statistics (OS) property will not exit the strip between two non-decreasing, possibly discontinuous, time-dependent boundar...
In this study we develop a multi-factor extension of the family of Lee-Carter stochastic mortality models. We build upon the time, period and cohort stochastic model structure to extend it to include exogenous observable demographic features that can...
Value-at-Risk (VaR) is a well-accepted risk metric in modern quantitative risk management (QRM). The classical Monte Carlo simulation (MCS) approach, denoted henceforth as the classical approach, assumes the independence of loss severity and loss fre...
For evaluating the probabilities of arbitrary random events with respect to a given multivariate probability distribution, specific techniques are of great interest. An important two-dimensional high risk limit law is the Gauss-exponential distributi...
Measuring interdependence between probabilities of default (PDs) in different industry sectors of an economy plays a crucial role in financial stress testing. Thereby, regression approaches may be employed to model the impact of stressed industry sec...
This paper provides a complete program for the valuation of aggregate non-life insurance liability cash flows based on claims triangle data. The valuation is fully consistent with the principle of valuation by considering the costs associated with a...
In this paper we develop a well-established financial model to investigate whether bubbles were present in opinion polls and betting markets prior to the UK’s vote on EU membership on 23 June 2016. The importance of our contribution is threefold. Fir...
This paper proposes a model-free approach to hedging and pricing in the presence of market imperfections such as market incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging st...
This work proposes a backtesting analysis that compares the Lee–Carter and the Cairns–Blake–Dowd mortality models, employing Italian data. The mortality data come from the Italian National Statistics Institute (ISTAT) database and span the period 197...
Much of the debate around a potential British exit (Brexit) from the European Union has centred on the potential macroeconomic impact. In this paper, we instead focus on understanding market expectations for price action around the Brexit referendum...
Pareto processes are suitable to model stationary heavy-tailed data. Here, we consider the auto-regressive Gaver–Lewis Pareto Process and address a study of the tail behavior. We characterize its local and long-range dependence. We will see that cons...
