Abstract
We propose a new framework for evaluating and analyzing the complex risks embedded in a life insurance company’s balance sheet, both on the asset and liability side. To this purpose, we apply an actuarial method not only to the insurance liabilities, but also to the corporate bonds and stocks as in the same manner as already developed in Kijima and Muromachi (1998a). And we introduce the VaRs and RAPMs, which are commonly used, to both asset and liability portfolios, and discuss their calculation methods with some preliminary numerical illustrations. The conclusion is that a life insurance company is recommended to segregate the total liabilities into several portions of the same nature and risk profile, and paste the appropriate hedging assets to them so as to maximize RAPM of each segment.
Key Words: HJM model, Amin-Jarrow model, hazard process, cohort model, default swap, VaR, RAPM, marginal VaR, Thiele’s equation.
Key Words: HJM model, Amin-Jarrow model, hazard process, cohort model, default swap, VaR, RAPM, marginal VaR, Thiele’s equation.
Volume
Toyko
Year
1999
Categories
Actuarial Applications and Methodologies
Dynamic Risk Modeling
Asset Liability Management (ALM);
Actuarial Applications and Methodologies
Investments
Asset/Liability Management (ALM);
Financial and Statistical Methods
Risk Measures
Value-at-Risk (VAR);
Financial and Statistical Methods
Asset and Econometric Modeling
Business Areas
Other Lines of Business
Publications
ASTIN Colloquium
