2019 September - 28 articles
This paper considers fundamental questions of arbitrage pricing that arises when the uncertainty model incorporates ambiguity about risk. This additional ambiguity motivates a new principle of risk- and ambiguity-neutral valuation as an extension of...
We propose a novel approach for loss reserving based on deep neural networks. The approach allows for joint modeling of paid losses and claims outstanding, and incorporation of heterogeneous inputs. We validate the models on loss reserving data acros...
It has been six years since Editor-in-Chief Steffensen (2013) wrote in his editorial that “to Risks inclusiveness, inter-disciplinarity, and open-mindedness is the very starting point [...]
In actuarial modelling of risk pricing and loss reserving in general insurance, also known as P&C or non-life insurance, there is business value in the predictive power and automation through machine learning. However, interpretability can be cri...
Managing unemployment is one of the key issues in social policies. Unemployment insurance schemes are designed to cushion the financial and morale blow of loss of job but also to encourage the unemployed to seek new jobs more proactively due to the c...
I derive practical formulas for optimal arrangements between sophisticated stock market investors (continuous-time Kelly gamblers or, more generally, CRRA investors) and the brokers who lend them cash for leveraged bets on a high Sharpe asset (i.e.,...
Credit default swap (CDS) spreads measure the default risk of the reference entity and have been frequently used in recent empirical papers. To provide a rigorous econometrics foundation for empirical CDS analysis, this paper applies the augmented Di...
This paper provides a critical analysis of the subadditivity axiom, which is the key condition for coherent risk measures. Contrary to the subadditivity assumption, bank mergers can create extra risk. We begin with an analysis how a merger affects de...
Long-term care (LTC) encompasses a set of services provided to impaired and dependent elderly people. To assess the level of the dependence several scales are used, including activities of daily living (ADL), instrumental ADL (IADL) and functional li...
This paper examines the bank liquidity risk while using a maturity mismatch indicator of loans and deposits (LTDm) during a specific period. Core banking activities that are based on the process of maturity transformation are the most exposed to liqu...
With the expected discontinuation of the LIBOR publication, a robust fallback for related financial instruments is paramount. In recent months, several consultations have taken place on the subject. The results of the first ISDA consultation have bee...
The Growth-Optimal Portfolio (GOP) theory determines the path of bet sizes that maximize long-term wealth. This multi-horizon goal makes it more appealing among practitioners than myopic approaches, like Markowitz’s mean-variance or risk parity...
We obtain closed-form expressions for the value of the joint Laplace transform of the running maximum and minimum of a diffusion-type process stopped at the first time at which the associated drawdown or drawup process hits a constant level before an...
This paper revisits the spectrally negative Lévy risk process embedded with the general tax structure introduced in Kyprianou and Zhou (2009). A joint Laplace transform is found concerning the first down-crossing time below level 0. The potent...
We consider a two-dimensional ruin problem where the surplus process of business lines is modelled by a two-dimensional correlated Brownian motion with drift. We study the ruin function
The sector of SME is the major force for the national economic and social development. Financial risk is one of the key threats to the activity of small and medium enterprises. The most common manifestation of the financial risk of SMEs is difficulty...
The purpose of this paper is to survey recent developments in granular models and machine learning models for loss reserving, and to compare the two families with a view to assessment of their potential for future development. This is best understood...
It is intuitive that proximity to hospitals can only improve the chances of survival from a range of medical conditions. This study examines the empirical evidence for this assertion, based on Australian data. While hospital proximity might serve as...
We analyzed real telematics information for a sample of drivers with usage-based insurance policies. We examined the statistical distribution of distance driven above the posted speed limit—which presents a strong positive asymmetry—using...
In this paper, we propose models for non-life loss reserving combining traditional approaches such as Mack’s or generalized linear models and gradient boosting algorithm in an individual framework. These claim-level models use information about...
We propose an alternative approach to the modeling of the positive dependence between the probability of default and the loss given default in a portfolio of exposures, using a bivariate urn process. The model combines the power of Bayesian nonparame...
The aim of this study was to investigate whether firms’ reporting delays are interconnected with bankruptcy risk and its financial determinants. This study was based on 698,189 firm-year observations from Estonia. Annual report submission delay...
In this paper, the generalized Pareto distribution (GPD) copula approach is utilized to solve the conditional value-at-risk (CVaR) portfolio problem. Particularly, this approach used (i) copula to model the complete linear and non-linear correlation...
In this paper, we measure the systemic risk with a novel methodology, based on a “spatial-temporal” approach. We propose a new bank systemic risk measure to consider the two components of systemic risk: cross-sectional and time dimension....
We consider de Finetti’s stochastic control problem when the (controlled) process is allowed to spend time under the critical level. More precisely, we consider a generalized version of this control problem in a spectrally negative Lévy...
The Hierarchical risk parity (HRP) approach of portfolio allocation, introduced by Lopez de Prado (2016), applies graph theory and machine learning to build a diversified portfolio. Like the traditional risk-based allocation methods, HRP is also a fu...
Solvency II requirements introduced new issues for actuarial risk management in non-life insurance, challenging the market to have a consciousness of its own risk profile, and also investigating the sensitivity of the solvency ratio depending on the...
In this study, we consider the problem of zero claims in a liability insurance portfolio and compare the predictability of three models. We use French motor third party liability (MTPL) insurance data, which has been used for a pricing game, and show...
