Risks, Volume 6, Issue 2

The Solvency II directive asks insurance companies to derive their solvency capital requirement from the full loss distribution over the coming year. While this is in general computationally infeasible in the life insurance business, an application o...

This article reviews two leading measures of financial risk and an emerging alternative. Embraced by the Basel accords, value-at-risk and expected shortfall are the leading measures of financial risk. Expectiles offset the weaknesses of value-at-risk...

In this paper we analyze insurance demand when the utility function depends both upon final wealth and the level of losses or gains relative to a reference point. Besides some comparative statics results, we discuss the links with first-order risk av...

This paper studies the moments and the distribution of the aggregate discounted claims (ADCs) in a Markovian environment, where the claim arrivals, claim amounts, and forces of interest (for discounting) are influenced by an underlying Markov process...

We review two complementary mixture-based clustering approaches for modeling unobserved heterogeneity in an insurance portfolio: the generalized linear mixed cluster-weighted model (CWM) and mixture-based clustering for an ordered stereotype model (O...

This paper considers risks of the investment portfolio, which consist of distributed mortgages and sold European call options. It is assumed that the stream of the credit payments could fall by a jump. The time of the jump is modeled by the exponenti...

Credit risk is a critical issue that affects banks and companies on a global scale. Possessing the ability to accurately predict the level of credit risk has the potential to help the lender and borrower. This is achieved by alleviating the number of...

We model the logarithm of the spot price of electricity with a normal inverse Gaussian (NIG) process and the wind speed and wind power production with two Ornstein–Uhlenbeck processes. In order to reproduce the correlation between the spot pric...

In this paper, we study the implications of diversification in the asset portfolios of banks for financial stability and systemic risk. Adding to the existing literature, we analyse this issue in a network model of the interbank market. We carry out...

Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two-dimensional space of utility...