Browse Research
Viewing 1951 to 1975 of 7690 results
2008
In an arbitrage-free economy, it is well-known that financial risks can be priced using equivalent martingale measures. We establish in this paper that, for general stochastic processes, the Wang Transform does not lead to a price which is consistent with the arbitrage-free price. Based on these results we must conclude that the Wang Transform cannot be a universal framework for pricing financial and insurance risks.
2008
One of the central issues in the Solvency II process will be an appropriate calculation of the Solvency Capital Requirement (SCR). This is the economic capital that an insurance company must hold in order to guarantee a one-year ruin probability of at most 0.5%.
2008
This paper investigates the role of private insurance in the prevention and mitigation of natural disasters. We characterize the equity-efficiency trade-off faced by the policymakers under imperfect information about individual prevention costs.
2008
Damage costs from hurricanes have increased dramatically as hurricane strikes, populations, and property values have increased along the U.S. southeastern and Gulf Coast states. Federal expenditures in hurricane affected areas and coastal property insurance costs have increased as well.
2008
The impact that capital structure and capital asset allocation have on financial services firm economic capital and risk adjusted performance is considered. A stochastic modelling approach is used in conjunction with banking and insurance examples. It is demonstrated that gearing up Tier 1 capital with Tier 2 capital can be in the interests of bank Tier 1 capital providers, but may not always be so for insurance Tier 1 capital providers.
2008
We exploit the transparency of internal capital markets (ICMs) within insurance groups to investigate the activity and efficiency of ICMs within insurance groups. Specifically, we compare the relationship between internal capital transfers and investment to that between capital from other sources and investment. The ability to track the actual ICM transactions allows for more direct analysis of ICM activity than most previous studies.
2008
This paper examines the properties that a risk measure should satisfy in order to characterize an investor’s preferences. In particular, we propose some intuitive and realistic examples that describe several desirable features of an ideal risk measure. This analysis is the first step in understanding how to classify an investor’s risk.
2008
We extend the original form of prospect theory by Kahneman and Tversky from finite lotteries to arbitrary probability distributions, using an approximation method based on weak-⋆ convergence. The resulting formula is computationally easier than the corresponding formula for cumulative prospect theory and makes it possible to use prospect theory in future applications in economics and finance.
2008
The Discounted Cash Flow (DCF) and Capital Asset Pricing Model (CAPM) approaches are widely used for estimating the cost of equity capital in regulated (and unregulated) industries.1 NCCI employs both concepts in estimating the cost of equity capital for the Property and Casualty (P&C) insurance industry as part of its ratemaking process.
2008
Governments and international organizations worry increasingly about systemic risk, under which the world’s financial system can collapse like a row of dominoes. There is widespread confusion, though, about the causes and even the definition of systemic risk, and uncertainty about how to control it.
2008
We propose a consumption-based capital asset pricing model consumption (CAPM), in which the pricing kernel is calculated as the average of individuals' intertemporal marginal rates of substitution weighted by the probabilities of holding the asset in question. These probabilities are conditional on available imperfect sample separation information and are estimated simultaneously with the parameters of Euler equations.
2008
Much effort has been put in order to identify the possible risks hindering the successful completion of software projects. Techniques in risk mitigation, management and monitoring plan devise the estimation process of risk likelihood and their possible impact on the progress of software project. Risk Mitigation, Monitoring, Management is a thorough and continuous process, which aims to bring the potentially losing project to the safer shore.
2008
One of the most intriguing questions in insurance is the preference of consumers for low or zero deductible insurance policies. This stands in sharp contrast to a theorem proved by Mossin [Mossin, J. (1968). Aspects of rational insurance purchasing. Journal of Political Economy, 76, 553â568], that under quite common assumptions when the price of insurance is higher than its actuarial value, then full coverage is not optimal.
2008
Past research indicates that personal flood experience is an important factor in motivating mitigation behavior. It is not fully clear, however, why such experience is so important. This study tested the hypothesis that people without flooding experience underestimate the negative affect evoked by such an event.
2008
This paper by the Committee of European Insurance and Occupational Pensions Supervisors' (CEIOPS) Chair gives an overview of the main current features of the Solvency II project and CEIOPS work on it, at the time of writing (September 2007). After a brief summary of reasons, drivers and objectives for the proposed new regime, some of the details are described, in terms of CEIOPS' published Advice to the European Commission.
2008
Expectile models are derived using asymmetric least squares. A simple formula has been presented that relates the expectile to the expectation of exceedances beyond the expectile. We use this as the basis for estimating the expected shortfall. It has been proposed that the quantile be estimated by the expectile for which the proportion of observations below the expectile is . In this way, an expectile can be used to estimate value at risk.
2008
Following the final revision of Basel II, Value-at-Risk (VaR) is becoming one of the most used risk measures for managing market and operational risks. Nevertheless, in recent years, some undesirable drawbacks in its use have been pointed out by academics.
2008
A distortion-type risk measure is constructed, which evaluates the risk of any uncertain position in the context of a portfolio that contains that position and a fixed background risk. The risk measure can also be used to assess the performance of individual risks within a portfolio, allowing for the portfolio's re-balancing, an area where standard capital allocation methods fail.
2008
Much of the push for ERM has come from regulators and rating agencies, but it is being applied in internal company decision‐making as well. This paper reviews the progress made and the needs still outstanding in two key areas of application: optimal capital level for an insurer and risk‐adjusted profitability of business units. The basic conclusion is that progress has been made in these areas, but more is needed.
2008
Two experiments were designed to explore the existence of systematic differences in risk perceptions and risk attitudes between Chinese and US participants. The first experiment involved ranking monetary lotteries using measures of perceived riskiness and willingness to pay (WTP). Several simple heuristics were evaluated to predict perceived riskiness and WTP.
2008
The cyclical disconnect between demand and supply for reinsurance protection from natural catastrophe risks led insurers to look for solutions outside of the traditional insurance markets.
2008
Due to the highly skewed and heavy-tailed distributions associated with the insurance claims process, we evaluate the Rubinstein-Leland (RL) model for its ability to improve the cost of equity estimates of insurance companies because of its distribution-free feature.
2008
Previous studies identify limited potential efficacy of weather derivatives in hedging agricultural exposures. In contrast to earlier studies which investigate the problem at low levels of aggregation, we find that better weather hedging opportunities may exist at higher levels of spatial aggregation.
2008
This paper investigates the optimal design of weather bonds for reinsurance purposes. The motivation for this task comes from an empirical study showing that German farmers are not willing to pay the premiums for weather insurance that insurers ask for.
2008
Enterprise risk management has become a major focus for insrurers and reinsurers, Capitalization and pricing decisions are recognized as critical to firm value maximization.
