Browse Research
Viewing 2151 to 2175 of 7690 results
2007
To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal data, expert opinions and relevant external data.
2007
An Actuarial Premium Pricing Model for Nonnormal Insurance and Financial Risks in Incomplete Markets
A model for pricing insurance and financial risks, based on recent developments in actuarial premium principles with elliptical distributions, is developed for application to incomplete markets and heavy-tailed distributions. The pricing model involves an application of a generalized variance premium principle from insurance pricing to the pricing of a portfolio of nontraded risks relative to a portfolio of traded risks.
2007
This study develops a contingent-claim framework for valuing a reinsurance contract and examines how a reinsurance company can increase the value of a reinsurance contract and reduce its default risk by issuing catastrophe (CAT) bonds. The results also show how the changes in contract values and default risk premium are related to basis risk, trigger level, catastrophe risk, interest rate risk, and the reinsurer’s capital position.
2007
This paper examines the conditions required to guarantee positive prices in the CAPM. Positive prices imply an upper bound on the equity premium. This upper bound depends on the degree of diversity of firms' fundamentals, and it is independent of investors' preferences. In economies with realistically diverse assets the only positive-price CAPM equilibrium theoretically possible is a degenerate one, with zero equity premium.
2007
The conditional tail expectation used in continuous risk analysis describes the expected amount of risk that could be experienced given that a potential risk exceeds a threshold value, and provides a coherent risk measure that is preferable than the value-at-risk, a risk measure that is widely used but fails to satisfy the coherency principle.
2007
This study shows that (a) project valuation via CAPM contradicts valuation via arbitrage pricing, (b) CAPM-minded decision makers may fail to profit from arbitrage opportunities, (c) Standard CAPM-based valuation violates value additivity. As a consequence, the use of CAPM for project valuation and decision making should be reconsidered.
2007
Many risk measures have been recently introduced which (for discrete random variables) result in Linear Programs (LP). While some LP computable risk measures may be viewed as approximations to the variance (e.g., the mean absolute deviation or the Gini’s mean absolute difference), shortfall or quantile risk measures are recently gaining more popularity in various financial applications.
2007
We compare in a backtesting study the performance of univariate models for ValueatRisk (VaR) and expected shortfall based on stable laws and on extreme value theory (EVT).
2007
Using the chain ladder method we estimate the total ultimate claim amounts at time I and time I + 1 (successive best estimate predictions for the ultimate claims when updating the information from time I to time I + 1). The claims development result is then defined to be the difference of these two best estimators.
2007
As the world’s largest industry, the insurance sector is both an aggregator of the impacts of climate change and a market actor able to play a material role in decreasing the vulnerability of human and natural systems.
2007
The current study reviews the risk financing techniques employed in the insurance markets and looks at the changing field of the risk management arena. The overarching view is that apart from the traditional channels of financing risk, alternative routes should be explored. The latter is strengthened with the surfacing of off-balance sheet instruments in modern financial markets.
2007
The tasks of a supervisory authority (SA) are to guide and inspect municipalities in mitigation, and risk and emergency management. Two municipalities which have shown different responses to the work of SA are compared. Klepp municipality resisted inspections by SA and created its own solution to risk management. Time municipality regarded governmental guidelines as a facilitator to their work and accepted inspections.
2007
Security risk mitigation is a salient issue in systems development research. This paper introduces a lightweight approach to security risk mitigation that can be used within an Agile Development framework — the Security Obstacle Mitigation Model (SOMM). The SOMM uses the concept of trust assumptions to derive obstacles and the concept of misuse cases to model the obstacles.
2007
This paper considers a consumption-based asset pricing model where housing is explicitly modeled both as an asset and as a consumption good. Nonseparable preferences describe households' concern with composition risk, that is, fluctuations in the relative share of housing in their consumption basket.
2007
The European insurance industry is currently undergoing a substantial change in financial reporting requirements. Beginning in 2005, compliance with the International Financial Reporting Standards (IFRS) has been required in the European Union. Substantial sections of the IFRS - leading to a market-oriented valuation of insurance contracts - are still under construction and will be introduced in the next few years.
2007
The problem of allocating responsibility for risk among members of a portfolio arises in a variety of financial and risk-management contexts. Examples are particularly prominent in the insurance sector, where actuaries have long sought methods for distributing capital (net worth) across a number of distinct exposure units or accounts according to their relative contributions to the total ‘‘risk’’ of an insurer’s portfolio.
2007
The double exponential jump-diffusion (DEJD) model, recently proposed by Kou (Manage Sci 48(8), 1086–1101, 2002) and Ramezani and Zeng (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=606361, 1998), generates a highly skewed and leptokurtic distribution and is capable of matching key features of stock and index returns.
2007
An acceptability measure is a number that summarizes information on monetary outcomes of a given position in various scenarios, and that, depending on context, may be interpreted as a capital requirement or as a price. In a multiperiod setting, it is reasonable to require that an acceptability measure should satisfy certain conditions of time consistency. Various notions of time consistency may be considered.
2007
The standard formula for the calculation of the capital requirement within the EU's Solvency II project will be modular based. Each capital charge from the modules will be calculated consistent with the overall capital charge, i.e. with the same risk measure, the same confidence level and time horizon. If any of the underlying probability distributions are skewed, then the model must be calibrated for that to retain the consistency.
2007
The recent trend in estimating Value-at-Risk for modern and increasingly complex portfolios is the introduction of conditional models accounting for the heteroscedasticity of market risk factors. In this work, the introduction of complex methodologies is justified in relation to the dynamical characteristics of portfolios, represented by the concept of entropy.
2007
We develop and test a statistical model to identify Australian general insurers experiencing financial distress over the 1999–2001 period. Using a logit model and two measures of financial distress we are able to predict, with reasonable confidence, the insurers more likely to be distressed. They are generally small and have low return on assets and cession ratios.
2007
What is the effect of non-tradeable idiosyncratic risk on asset-market risk premiums? Constantinides and Duffie [Constantinides, G.M., Duffie, D., 1996. Asset pricing with heterogeneous consumers. Journal of Political Economy 104, 219-240] and Mankiw [Mankiw, N.G., 1986. The equity premium and the concentration of aggregate shocks.
2007
Equity capital allocation plays a particularly important role for financial institutions such as banks, who issue equity infrequently but have continuous access to debt capital. In such a context this paper shows that EVA and RAROC based capital budgeting mechanisms have economic foundations.
