Browse Research
Viewing 3326 to 3350 of 7690 results
2001
In this article, the authors analyze the derivatives holdings of U.S. insurers to empirically investigate the general hypotheses developed in the financial literature to explain why widely held, value-maximizing firms engage in risk management.
2001
The allocation problem stems from the diversification effect observed in risk measurements of financial portfolios: the sum of the "risks" of many portfolios is larger than the "risks" of the sum of the portfolios. The allocation problem is to apportion this diversification advantage to the portfolios in a fair manner, yielding, for each portfolio, a risk appraisal that accounts for diversification.
2001
Mixed Poisson distributions are widely used for modeling claim counts when the portfolio is thought to be heterogeneous. The risk (or mixing) distribution then represents a measure of this heterogeneity. The aim of this paper is to use a variant of the Patilea and Rolin [15] smoothed version of the Simar [20] Non-Parametric Maximum Likelihood Estimator of the risk distribution in the mixed Poisson model.
2001
This paper provides an analytical approximation for computing value at risk and other risk measures for portfolios that may include options and other derivatives with defaultable counterparties or borrowers.
2001
Underwriting cycles, with their wide and puzzling swings in premiums and profitability, challenge the pricing actuary to adapt rates to market realities. Understanding the forces behind insurance price fluctuations is a prerequisite to analyzing market prices. Underwriting cycles have been ascribed to actuarial ratemaking procedures, to underwriting philosophy, and to interest rate volatility.
2001
This paper deals with the relationship between volatility or, more correctly, b values and return within the equities asset class. The existence of such a relationship has been controversial in actuarial circles, but the assumption that a positive linear relationship exists is now taught as part of the curriculum.
2001
In this paper, we explore the Loss Distribution Approach (LDA) for computing the capital charge of a bank for operational risk where LDA refers to statistical/actuarial methods for modelling the loss distribution. In this framework, the capital charge is calculated using a Value-at-Risk measure.
2001
This paper examines the market for catastrophe event risk – i.e., financial claims that are linked to losses associated with natural hazards, such as hurricanes and earthquakes. Risk management theory suggests protection by insurers and other corporations against the largest cat events is most valuable. However, most insurers purchase relatively little cat reinsurance against large events, and premiums are high relative to expected losses.
2001
We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. A surprising number of firms use firm risk rather than project risk in evaluating new investments.
2001
Using the insights of current research in corporate finance and financial institutions, the authors briefly present a consistent economic framework for looking at insurance. Shareholders of insurance companies provide risk capital that is invested in financial assets and therefore earns the market return of the assets it is invested in.
2001
The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation.
2001
The intertemporal CAPM predicts that an asset's price is equal to the expectation of the product of the asset's payoff and a representative consumer's intertemporal marginal rate of substitution. This paper develops an alternative approach to asset pricing based on corporations' desire to hoard liquidity.
2001
In the last few years we have witnessed growing interest in Dynamic Financial Analysis (DFA) in the nonlife insurance industry. DFA combines many economic and mathematical concepts and methods. It is almost impossible to identify and describe a unique DFA methodology. There are some DFA software products for nonlife companies available in the market, each of them relying on its own approach to DFA.
2001
Until recently, the importance of skewness in the rate of return distribution has been largely unrecognized in financial journals. The re-emergence of skewness in financial literature is particularly relevant to catastrophe insurance products where some of the most extremely skewed distributions occur. This paper presents an argument for including a provision in the equilibrium premium to cover the cost of skewness.
2001
The importance of public-private partnerships for disaster management has been stimulated by catastrophic losses from natural disasters in the United States and other parts of the world. Hurricane Andrew which created damage to Miami and Dade/County, Florida in September 1992 and California’s Northridge earthquake together cost the insurance industry (US$28 billion) and an additional US$17.6 billion.
2001
A key question facing both well-developed industrial countries and emerging economies is how to reduce future disaster losses while still providing financial protection to victims from these events. This paper proposes a strategy for the use of cost-effective risk mitigation measures coupled with insurance and/or new capital market instruments to achieve these objectives.
2001
Risk measures based on distorted probabilities have been recently developed in actuarial science and applied to insurance rate making. We propose a risk measure that has the properties of risk aversion and diversification, is additive for losses and consistent in its treatment of insurance and investment risks. We show that the risk measure based on distorted probabilities is not consistent in its ordering of insurance and investment risks.
2001
This paper explores the ability of conditional versions of the CAPM and the consumption CAPM--jointly the (C)CAPM--to explain the cross section of average stock returns. Central to our approach is the use of the log consumption-wealth ratio as a conditioning variable.
2001
This study shows how option pricing methods can be used to allocate re- quired capital (surplus) across lines of insurance. The capital allocations depend on the uncertainty about each line‘s losses and also on correlations with other lines‘ losses and with asset returns. The allocations depend on the marginal contribution of each line to default value-that is, to the present value of the insurance company‘s option to default.
2001
At the heart of the traditional approach to strategy in the climate change dilemma lies the assumption that the global community, by applying a set of powerful analytical tools, can predict the future of climate change accurately enough to choose a clear strategic direction for it.
2001
Aggregate Loss Distributions are used extensively in actuarial practice, both in ratemaking and reserving. A number of approaches have been developed to calculate aggregate loss distributions, including the Heckman-Meyers method, Panjer method, Fast Fourier transform, and stochastic simulations. All these methods are based on the assumption that separate loss frequency and loss severe distributions are available.
2001
Various approaches have been taken to pricing insurance risk. Recently, a number of authors have written on relationships between insurance pricing and pricing in financial markets. A common central quantity in both insurance and finance is return on equity (ROE).
