Browse Research
Viewing 1926 to 1950 of 7690 results
2008
To quantify the aggregate losses from operational risk, we employ an actuarial risk model, ie, we consider the compound Cox model of operational risk to deal with the stochastic nature of its frequency rate in real situations. A shot noise process is used for this purpose. A compound Poisson model is also considered as its counterpart for the case where the operational loss frequency rate is deterministic.
2008
The valuation of options embedded in insurance contracts using concepts from financial mathematics (in particular, from option pricing theory), typically referred to as fair valuation, has recently attracted considerable interest in academia as well as among practitioners.
2008
This study examines the relationship between regulatory intervention in private Canadian auto insurance markets and the size of the involuntary market, insured losses and industry wide loss ratios. Fundamentally, the Canadian experience is significantly different from the U.S. experience. The presence of prior-approval regulation does not impact the size of involuntary markets in Canada.
2008
This paper proposes a risk-based explanation for the accrual anomaly. Risk is measured using a four-factor model motivated by the Intertemporal Capital Asset Pricing Model. Tests of the model suggest that a considerable portion of the cross-sectional variation in average returns to high and low accrual firms is explained by risk.
2008
It is well known that the Wang transform [Wang, S.S., 2002. A universal framework for pricing financial and insurance risks. Astin Bull. 32, 213-234] for the pricing of financial and insurance risks is derived from Bühlmann's economic premium principle [Bühlmann, H., 1980. An economic premium principle. Astin Bull. 11, 52-60]. The transform is extended to the multivariate setting by [Kijima M., 2006.
2008
This paper analyzes the regulation of property insurance markets affected by the risk of hurricanes in the US and initiates an exploration of the political economy of catastrophe risk. The severe storm seasons of 2004-2005 and subsequent market developments prompted a range of government reactions in various states. The paper examines the interaction of catastrophe risk, loss shocks, insurance market responses, and government actions.
2008
We consider an insurance risk model for the cashflow of an insurance company, which invests its reserve into a portfolio consisting of risky and riskless assets. The price of the risky asset is modeled by an exponential Lévy process. We derive the integrated risk process and the corresponding discounted net loss process. We calculate certain quantities as characteristic functions and moments.
2008
Hyman P. Minsky’s financial fragility hypothesis appears highly relevant in understanding the current crisis in the financial systems of developed countries.
2008
We theoretically and empirically investigate the role of information on the cross section of stock returns and firms' cost of capital when investors face estimation risk and learn from noisy signals of uncertain quality. The resultant equilibrium is an information-dependent conditional CAPM. We find strong empirical support for the model.
2008
This paper examines the role that insurance and mitigation can play in reducing losses from natural disasters using data collected as part of a large-scale study on catastrophic risk jointly undertaken by the Wharton Risk Management Center in conjunction with Georgia State University and the Insurance Information Institute.
2008
Empirical research has demonstrated that a lower feedback frequency combined with a longer period of commitment decreases myopia and thereby increases the willingness to invest in a risky asset. In an experimental study, we disentangle the intertwined manipulation of feedback frequency and commitment to analyze how each individual variable contributes to the change in myopia and how they interact.
2008
On September 14, 2005, a press report announced the Mississippi Attorney General’s intention to file a suit against the insurance industry forcing homeowners’ insurers to pay flood damage claims despite the standard water damage exclusion. This increase in uncertainty regarding whether insurance contracts would be upheld in Mississippi resulted in an increase in political risk.
2008
Using a sample of property–liability insurers over the period 1995–2004, we develop and test a model that explains performance as a function of line-of-business diversification and other correlates. Our results indicate that undiversified insurers consistently outperform diversified insurers. In terms of accounting performance, we find a diversification penalty of at least 1 percent of return on assets or 2 percent of return on equity.
2008
Securitization with payments linked to explicit mortality events provides a new investment opportunity to investors and financial institutions. Moreover, mortality-linked securities provide an alternative risk management tool for insurers. As a step toward understanding these securities, we develop an asset pricing model for mortality-based securities in an incomplete market framework with jump processes.
2008
The consumption-based CAPM pricing rule is sometimes interpreted as implying that the price of an asset with a random payoff falls short of its expected payoff if and only if the random payoff positively correlates with consumption. This note demonstrates that this interpretation to C-CAPM is not generally correct. More importantly, it investigates under what qualifications this intuitive interpretation still holds.
2008
This paper assumes that the underlying aggregate catastrophe claims process is the compound Poisson process and applies the recursive evaluation approach to compute the compound Poisson distribution. A novel, practical pricing model is developed for catastrophe insurance derivatives.
2008
This study investigates optimal production and hedging decisions for firms facing price risk that can be hedged with vulnerable contracts, i.e., exposed to nonhedgeable endogenous counterparty credit risk. When vulnerable forward contracts are the only hedging instruments available, the firm's optimal level of production is lower than without credit risk.
2008
The relation between the excess return of each security and its beta, where beta is defined as its regression against the return on the market portfolio, is linear in the Sharpe-Lintner capital asset pricing model. This linear relation is often interpreted to mean that CAPM investors are paid for bearing systematic risk.
2008
Climate change is already affecting the global insurance industry. These changes are often seen as being negative, although opportunities also exist. Other areas of insurance coverage may also be affected in addition to property damage. The potential for third-party liability claims from climate change is less well understood but has even greater potential to affect the industry.
2008
We assume that the claims liability process satisfies the distribution-free chain-ladder model assumptions. For claims reserving at time I we predict the total ultimate claim with the information available at time I and, similarly, at time I +1 we predict the same total ultimate claim with the (updated) information available at time I +1.
2008
Insurance derivatives facilitate the trading of insurance risks on capital markets, such as catastrophe derivatives that were traded on the Chicago Board of Trade. Simultaneously, insurance risks are traded through reinsurance portfolios. In this paper we make inferences about the market price of risk implied by the information embedded in the prices of these two assets.
2008
We present a dynamic model of corporate risk management and managerial career concerns. We show that managers with low (high) initial reputation have high (low) career concerns about keeping their jobs and receiving all future income. These managers are more likely to speculate (hedge) early in their careers. In the later stage of their careers when managers have less career concerns, there is no speculative motive for self interested managers.
2008
The cost of capital is a key element of the embedded value methodology for the valuation of a life business. Further, under some solvency approaches (in particular, the Swiss Solvency Test and the developing Solvency 2 project) assessing the cost of capital constitutes a step in determining the required capital allocation.
2008
This paper introduces a financial hedging model for global environmental risks. Our approach is based on portfolio insurance under hedging constraints. Each investor is assumed to maximize the expected utility of his/her portfolio which includes financial and environmental assets. The optimal investment is determined for quite general utility functions and hedging constraints.
2008
We argue that the implied cost of capital (ICC), computed using earnings forecasts, is useful in capturing time variation in expected stock returns. First, we show theoretically that ICC is perfectly correlated with the conditional expected stock return under plausible conditions. Second, our simulations show that ICC is helpful in detecting an intertemporal risk2013return relation, even when earnings forecasts are poor.
