The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a single model and the alternatives, consistent with the...

This paper provides a simple model for basis risk in a longevity framework, by separating common and idiosyncratic risk factors. Basis risk is captured by a single parameter, that measures the co-movement between the portfolio and the reference population. In this framework, the paper sets out...

This paper provides a closed-form Value-at-Risk (VaR) for the net exposure of an annuity provider, taking into account both mortality and interest-rate risk, on both assets and liabilities. It builds a classical risk-return frontier and shows that hedging strategies -- such as the transfer of...

We analyze theoretically how financial synergies among bank affiliates affect banks' choice of organizational structure in branches or subsidiaries characterized by different arrangements for internal insurance against affiliates' default. Financial synergies may be generated by reduced default...

This article provides natural hedging strategies for life insurance and annuity businesses written on a single generation or on different generations in the presence of both longevity and interest-rate risks. We obtain closed-form solutions for delta and gamma hedges against cohort-based...

Financial risk measurement is a challenging task because both the types of risk and their measurement techniques evolve quickly. This book collects a number of novel contributions for the measurement of financial risk, which addresses partially explored risks or risk takers in a wide variety of...

The risk appetite of insurance companies fluctuates over time in a quasi cyclical fashion. When their capitalization is high (low), companies choose portfolios with a high (small) share of risky assets. We show that this phenomenon may have the same source as the underwriting cycle, namely...