Browse Research
Viewing 2301 to 2325 of 7690 results
2006
In this article, we consider the links between solvency, capital allocation, and fair rate of return in insurance. A method to allocate capital in insurance to lines of business is developed based on an economic definition of solvency and the market value of the insurer balance sheet. Solvency, and its financial impact, is determined by the value of the insolvency exchange option.
2006
The valuation of life insurance contracts using concepts from financial mathematics has recently attracted considerable interest in academia as well as among practitioners. In this paper, we will investigate the valuation of participating contracts, which are characterized by embedded interest rate guarantees and some bonus distribution rules.
2006
Making the assumption that the distribution of operational-loss severity has finite mean, Klaus Böcker and Jacob Sprittulla suggest a refined version of the analytical operational VAR theorem derived in Böcker and Klüppelberg (2005), which significantly reduces the approximation error to operational VAR.
2006
Natural disasters often have catastrophic risks on insurance companies as well as on the insured.
2006
The Mean Square Error of Prediction in the Chain Ladder Reserving Method (Muck and Murphy Revisited)
We revisit the famous Mack formula [2], which gives an estimate for the mean square error of prediction MSEP of the chain ladder claims reserving method: We define a time series model for the chain ladder method. In this time series framework we give an approach for the estimation of the conditional MSEP. It turns out that our approach leads to results that differ from the Mack formula.
2006
The unprecedented losses from Hurricane Katrina can be explained by two paradoxes. The safe development paradox is that in trying to make hazardous areas safer, the federal government in fact substantially increased the potential for catastrophic property damages and economic loss.
2006
The main purpose to study risk measures for portfolio vectors X=(X1,...,Xd) is to measure not only the risk of the marginals Xi separately but to measure the joint risk of X caused by the variation of the components and their possible dependence. Thus, an important property of risk measures for portfolio vectors is consistency with respect to various classes of convex and dependence orderings.
2006
We develop a flexible and analytically tractable framework which unifies the valuation of corporate liabilities, credit derivatives, and equity derivatives. We assume that the stock price follows a diffusion, punctuated by a possible jump to zero (default).
2006
This article presents the concept of a copula-based top-down approach in the field of financial risk aggregation. Selected copulas and their properties are presented. Copula parameter estimation and goodness-of-fit tests are explained and algorithms for the simulation of copulas and meta-distributions are provided.
2006
This paper deals with portfolio optimization under different risk constraints. We use a set of hedge funds where departure from normality are significant. We optimizethe expected return under standard deviation, semi-variance, VaR and expected shortfall (or CVaR) constraints. As far as the VaR is concerned, we compare different estimators.
2006
Due to the new regulatory guidelines known as Basel II for banking and Solvency 2 for insurance, the financial industry is looking for qualitative approaches to and quantitative models for operational risk. Whereas a full quantitative approach may never be achieved, in this paper we present some techniques from probability and statistics which no doubt will prove useful in any quantitative modelling environment.
2006
We study dynamic monetary risk measures that depend on bounded discrete-time processes describing the evolution of financial values. The time horizon can be finite or infinite. We call a dynamic risk measure time-consistent if it assigns to a process of financial values the same risk irrespective of whether it is calculated directly or in two steps backwards in time.
2006
The paper deals with the study of a coherent risk measure, which we call Weighted V@R. It is a risk measure of the form where μ is a probability measure on [0,1] and TV@R stands for Tail V@R. After investigating some basic properties of this risk measure, we apply the obtained results to the financial problems of pricing, optimization, and capital allocation.
2006
We propose a new procedure for the risk measurement of large portfolios.
2006
The longstanding Gibrat’ Law is tested for the U.S. Property and Liability (P-L) insurance market and the effects of guaranty fund system on the insurance prices are analyzed, using data sets for the years 1992 - 2000. First, based on a complete panel data and using Heckman’s (1979) two-stage methodology, this paper examines the relationship between corporate growth and firm size.
2006
A growing literature contends that, since returns are not normal, higherorder comoments matter to risk-averse investors. Fama and French (1993, 1995) find that nonmarket risk factors based on size and book-to-market ratio are priced by investors. We test the hypothesis that the Fama-French factors simply proxy for the pricing of higherorder comoments.
2006
This paper applies the extreme-value (EV) generalised pareto distribution to the extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses tail estimators from these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user's risk-aversion function.
2006
This paper evaluates the need for a government role in insuring natural and man-made catastrophes in the United States. Although insurance markets have been stressed by major natural catastrophes, such as Hurricane Katrina, government involvement in the market for natural catastrophe insurance should be minimized to avoid crowding-out more efficient private market solutions, such as catastrophe bonds.
2006
This paper conducts an event study analysis of the impact of operational loss events on the market values of banks and insurance companies, using the OpVar database. We focus on financial institutions because of the increased market and regulatory scrutiny of operational losses in these industries.
2006
Using regular variation to define heavy tailed distributions, we show that prominent downside risk measures produce similar and consistent ranking of heavy tailed risk. Thus, regardless of the particular risk measure being used, assets will be ranked in a similar and consistent manner for heavy tailed assets.
2006
The question of whether the adoption of International Financial Reporting Standards (IFRS) results in measurable economic benefits is of special interest, particularly in light of the European Union's adoption of IFRS for listed companies. In this paper, I investigate the common conjecture that internationally recognised financial reporting standards (IAS/IFRS or US‐GAAP) reduce the cost of capital for adopting firms.
2006
We study the dynamic relation between daily stock returns and innovations in option-derived implied volatilities. By simultaneously analyzing innovations in index-level and firm-level implied volatilities, we distinguish between innovations in systematic and idiosyncratic volatility in an effort to better understand the asymmetric volatility phenomenon.
2006
Risk measures have been studied for several decades in the actuarial literature, where they appeared under the guise of premium calculation principles. Risk measures and properties that risk measures should satisfy have recently received considerable attention in the financial mathematics literature. Mathematically, a risk measure is a mapping from a class of random variables to the real line.
2006
In this paper we examine and summarize properties of several well-known risk measures that can be used in the framework of setting solvency capital requirements for a risky business. Special attention is given to the class of (concave) distortion risk measures. We investigate the relationship between these risk measures and theories of choice under risk.
