2018 September - 41 articles
Variable annuities, as a class of retirement income products, allow equity market exposure for a policyholder’s retirement fund with optional guarantees to limit the downside risk of the market. Management fees andguarantee insurance fees are c...
A fluctuation theory and, in particular, a theory of scale functions is developed for upwards skip-free Lévy chains, i.e., for right-continuous random walks embedded into continuous time as compound Poisson processes. This is done by analogy t...
The study considers the product life cycle in the stages of technological innovation, and focuses on how to evaluate the optimal investment strategy and the project value. It applies different product stages (three stages including production innovat...
A quantum mechanics approach is proposed to model non-life insurance risks and to compute the future reserve amounts and the ruin probabilities. The claim data, historical or simulated, are treated as coming from quantum observables and analyzed with...
Background, or systematic, risks are integral parts of many systems and models in insurance and finance. These risks can, for example, be economic in nature, or they can carry more technical connotations, such as errors or intrusions, which could be...
We utilize the data of a very large UK automobile loan firm to study the interaction of the characteristics of borrowers and loans in predicting the subsequent loan performance. Our broader findings confirm the earlier research on the issue of subpri...
The paper addresses three objectives: the first is a presentation and overview of some important developments in quantile times series approaches relevant to demographic applications—secondly, development of a general framework to represent qua...
We propose a novel credit risk measurement model for Corporate Default Swap (CDS) spreads that combines vector autoregressive regression with correlation networks. We focus on the sovereign CDS spreads of a collection of countries that can be regarde...
Almost sure bootstrap consistency of the blockwise bootstrap for the Average Value at Risk of single risks is established for strictly stationary
There exist several estimators of the regression line in the simple linear regression: Least Squares, Least Absolute Deviation, Right Median, Theil–Sen, Weighted Balance, and Least Trimmed Squares. Their performance for heavy tails is compared...
This study examines the linkages between Brazil, Russia, India, and China (BRICS) stock market returns, country risk ratings, and international factors via Non-linear Auto Regressive Distributed Lags models (NARDL) that allow for testing the asymmetr...
A justification of the Basel liquidity formula for risk capital in the trading book is given under the assumption that market risk-factor changes form a Gaussian white noise process over 10-day time steps and changes to P&L (profit-and-loss) are...
In this article we introduce the stability analysis of a compound sum: it consists of computing the standardized variation of the survival function of the sum resulting from an infinitesimal perturbation of the common distribution of the summands. St...
We study a toy model of linear-quadratic mean field game with delay. We “lift” the delayed dynamic into an infinite dimensional space, and recast the mean field game system which is made of a forward Kolmogorov equation and a backward Ham...
The paper analyzes the relationship between the credit default swaps (CDS) spreads for 5-year CDS in Europe and US, and fundamental macroeconomic variables such as regional stock indices, oil prices, gold prices, and interest rates. The dataset inclu...
Co-risk measures and risk contribution measures have been introduced to evaluate the degree of interaction between paired risks in actuarial risk management. This paper attempts to study the ordering behavior of measures on interaction between paired...
With the purpose of introducing dependence between different types of claims, multivariate collective models have recently gained a lot of attention. However, when it comes to the evaluation of the corresponding compound distribution, the problems in...
In this short paper, we study a VaR-type risk measure introduced by Guérin and Renaud and which is based on cumulative Parisian ruin. We derive some properties of this risk measure and we compare it to the risk measures of Trufin et al. and Lo...
In this paper, we study the discounted renewal aggregate claims with a full dependence structure. Based on a mixing exponential model, the dependence among the inter-claim times, the claim sizes, as well as the dependence between the inter-claim time...
A functional ARMA-GARCH model for predicting the value-at-risk of the EURUSD exchange rate is introduced. The model implements the yield curve differentials between EUR and the US as exogenous factors. Functional principal component analysis allows u...
(1) Background: Health insurance and social protection in Myanmar are negligible, which leaves many citizens at risk of financial hardship in case of a serious illness. The aim of this study is to explore the views of healthcare consumers and compare...
We present a stochastic simulation forecasting model for stress testing that is aimed at assessing banks’ capital adequacy, financial fragility, and probability of default. The paper provides a theoretical presentation of the methodology and th...
In this paper, we study the problem of misrepresentation under heavy-tailed regression models with the presence of both misrepresented and correctly-measured risk factors. Misrepresentation is a type of fraud when a policy applicant gives a false sta...
This paper examines the impact of volatility-based fund classification on portfolio performance. Using historical data on equity indices, we find that a strategy based on long-term portfolio volatility, as is imposed by the Synthetic Risk Reward Indi...
One way to formulate a multivariate probability distribution with dependent univariate margins distributed gamma is by using the closure under convolutions property. This direction yields an additive background risk model, and it has been very well-s...
Insurers issuing segregated fund policies apply dynamic hedging to mitigate risks related to guarantees embedded in such policies. A typical industry practice consists of using fund mapping regressions to represent basis risk stemming from the imperf...
Most of the models leading to an analytical expression for option prices are based on the assumption that underlying asset returns evolve according to a Brownian motion with drift. For some asset classes like commodities, a Brownian model does not fi...
The aim of this paper is to provide several examples of convex risk measures necessary for the application of the general framework for portfolio theory of Maier-Paape and Zhu (2018), presented in Part I of this series. As an alternative to classical...
We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of “fixed-sum” insurance contracts. The random variable ultimately is supposed to f...
This paper provides a rationale for the macro-prudential regulation of insurance companies, where capital requirements increase in their contribution to systemic risk. In the absence of systemic risk, the formal model in this paper predicts that opti...
In this note we study the problem of company values with a ruin constraint in classical continuous time Lundberg models. For this, we adapt the methods and results for discrete de Finetti models to time and state continuous Lundberg models. The polic...
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence, it is of utmost importance to study the mutual dependence of losses for different creditors in the case o...
A variable annuity is a popular life insurance product that comes with financial guarantees. Using Monte Carlo simulation to value a large variable annuity portfolio is extremely time-consuming. Metamodeling approaches have been proposed in the liter...
Although both over-dispersed Poisson and log-normal chain-ladder models are popular in claim reserving, it is not obvious when to choose which model. Yet, the two models are obviously different. While the over-dispersed Poisson model imposes the vari...
For automobile insurance, it has long been implied that when a policyholder made at least one claim in the prior year, the subsequent premium is likely to increase. When this happens, the policyholder may seek to switch to another insurance company t...
In investment and insurance contracts, certain stipulated payments may depend on the hedging strategy. We study the problem of calculation, hedging and valuation of such cash flows, by considering a payment process in a setup with taxes and investmen...
Pension funds, which manage the financing of a large share of global retirement schemes, need to invest their assets in a diversified manner and over long durations while managing interest rate and longevity risks. In recent years, a new type of inve...
We investigate masked financial instability caused by wealth inequality. When an economic sector is decomposed into two subsectors that possess a severe wealth inequality, the sector in entirety can look financially stable while the two subsectors po...
Participating life insurance contracts entitle the policyholder to participate in the company’s annual surplus. Typically, they are also equipped with a surrender option that allows the policyholder to terminate the contract prior to maturity,...
We explored the effect of the jump-diffusion process on a social benefit scheme consisting of life insurance, unemployment/disability benefits, and retirement benefits. To do so, we used a four-state Markov chain with multiple decrements. Assuming in...
Statistical modeling techniques—and factor models in particular—are extensively used in practice, especially in the insurance and finance industry, where many risks have to be accounted for. In risk management applications, it might be im...
