Browse Research
Viewing 2326 to 2350 of 7690 results
2006
Globally, around 80% of disaster-related losses are uninsured. There are many reasons for this market failure: from the insurers‘ point of view these include high risk or small scale, absence of reliable risk data, and volatility in the event costs; from the at-risk population these include high prices, a misperception of the true risk, an expectation of government aid after disasters, and exclusion from financial services.
2006
We discuss a number of quantile-based risk measures (QBRMs) that have recently been developed in the financial risk and actuarial/insurance literatures. The measures considered include the Value-at-Risk (VaR), coherent risk measures, spectral risk measures, and distortion risk measures. We discuss and compare the properties of these different measures, and point out that the VaR is seriously flawed.
2006
A survivor swap (SS) is an agreement to exchange cash flows in the future based on the outcome of at least one survivor index. This article discusses the possible uses of SSs as instruments for managing, hedging, and trading mortality-dependent risks. SSs are especially useful for insurance companies, but also offer other interested parties low beta avenues into the acquisition of mortality risk exposure.
2006
This paper uses a recently developed two-factor stochastic mortality model to estimate financial risk measures for four illustrative types of mortality-dependent financial position: investments in zero-coupon longevity bonds; investments in longevity bonds that pay annual survivor-dependent coupons; and two examples of an insurer's annuity book that are each hedged by a longevity bond, one based on the annuity book and hedge having the same refer
2006
Operational risk is being recognized as an important risk component for financial institutions as evinced by the large sums of capital that are allocated to mitigate this risk. Therefore, risk measurement is of paramount concern for the purposes of capital allocation, hedging, and new product development for risk mitigation.
2006
Considerable evidence suggests that many people for whom insurance is worth purchasing do not have coverage and others who appear not to need financial protection against certain events actually have purchased coverage.
2006
This paper explores options for programs to be put in place prior to a disaster to avoid large and often poorly-managed expenditures following a catastrophe and to provide appropriate protection against the risk of those large losses which do occur.
2006
The determination and allocation of economic capital is important for pricing, risk management, and related insurer financial decision making. This paper considers the allocation of economic capital to lines of business in insurance. We show how to derive closed-form results for the complete markets, arbitrage-free allocation of the insurer default option value, or insolvency exchange option, to lines of business for an insurer balance sheet.
2006
This paper examines empirically the impact of mergers and acquisitions on the capital allocation of newly formed insurers as well as on changes in the price of insurance across lines of business of those insurers in the U.S. property-liability insurance industry over the sample period 1995-2004.
2006
This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function.
2006
We describe a numerical procedure to obtain bounds on the distribution function of a sum of n dependent risks having fixed marginals. With respect to the existing literature, our method provides improved bounds and can be applied also to large non-homogeneous portfolios of risks. As an application, we compute the VaR-based minimum capital requirement for a portfolio of operational risk losses.
2006
Most businesses have assets financed by capital providers. The cost of capital is a measure of the returns required by those capital providers. Its main use is to set a target for the profits, which must be achieved on the firm‘s assets in order to satisfy equity and bond holders. This paper describes the classical theory of the cost of capital, and then applies it to the special case of banking and insurance firms.
2006
We examine (1) how value premiums vary with firm size, (2) whether the CAPM explains value premiums, and (3) whether, in general, average returns compensate 03B2 in the way predicted by the CAPM. Loughran's (1997) evidence for a weak value premium among large firms is special to 1963 to 1995, U.S. stocks, and the book-to-market value-growth indicator. Ang and Chen's (2005) evidence that the CAPM can explain U.S.
2006
The equity premium designates four different concepts: Historical Equity Premium (HEP); Expected Equity Premium (EEP); Required Equity Premium (REP); and Implied Equity Premium (IEP). We highlight the confusing message in the literature regarding the equity premium and its evolution.
2006
By resorting to wavelet analysis, we estimate the capital asset pricing model (CAPM) at different time-scales for the Chilean stock market. Our sample comprises 24 stocks that were actively traded on the Santiago Stock Exchange over 1997-2002. We find evidence in support of the CAPM at a medium-term horizon. We extend the literature in this area to analyze the impact of time scaling on the computation of value at risk.
2006
Operational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in impact. Regulators have also been devoting attention to this risk and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks.
2006
A generalized distortion risk measure is introduced as power of the mean absolute deviation power of a distorted random variable with respect to a location parameter. This class of risk measures extends both the distortion risk measure by Wang and Denneberg and the class of financial risk measures by Pedersen and Satchell, which itself contains the class of Stone.
2006
First the conference planners must be complemented for their foresight to put catastrophe insurance on the agenda for this conference, long before Hurricane Katrina crashed into New Orleans. As Katrina illustrates, the problems affecting catastrophe insurance in the United States are taking on, well, catastrophic proportions.
2006
In this column, we discuss a version of the utility maximization hypothesis that can be testedâand we find that it is false. We review empirical challenges to utility maximization, which return to the old question of whether preferences optimize the experience of outcomes.
2006
This article investigates performance of interval estimators of various actuarial risk measures. We consider the following risk measures: proportional hazards transform (PHT), Wang transform (WT), value-at-risk (VaR), and conditional tail expectation (CTE).
2006
This paper proposes a multivariate extension of the equilibrium pricing transforms for pricing general financial and insurance risks. The multivariate Esscher and Wang transforms are derived from Bühlmann's equilibrium pricing model (1980) under some assumptions on the aggregate risk. It is shown that the Esscher and Wang transforms coincide with each other when the underlying risks are normally distributed.
2006
The paper investigates the demand for reinsurance in insurer risk management. The insurer's objective is to maximize shareholder value under a solvency constraint imposed by a regulatory authority. In a one period model of a regulated market where the required solvency level is fixed, an insurer is assumed to maintain solvency using two control variables: reinsurance and risk capital supplied by shareholders.
2006
We consider optimization problems for minimizing conditional value-at-risk (CVaR) from a computational point of view, with an emphasis on financial applications. As a general solution approach, we suggest to reformulate these CVaR optimization problems as two-stage recourse problems of stochastic programming. Specializing the L-shaped method leads to a new algorithm for minimizing conditional value-at-risk.
2006
Given the growing need for managing financial risk, risk prediction plays an increasing role in banking and finance. In this study we compare the out-of-sample performance of existing methods and some new models for predicting value-at-risk (VaR) in a univariate context.
2006
Hurricane Katrina illustrates the natural disaster syndrome. Prior to a disaster, individuals in hazard-prone regions do not voluntarily adopt cost-effective loss reduction measures. The federal government then comes to the rescue with disaster assistance even if it claimed it had no intention of doing so prior to the event. There are a number of reasons why individuals do not protect themselves prior to a disaster.
