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A credit-risk valuation under the variance-gamma asset return
Ivanov, Roman V. - In: Risks : open access journal 6 (2018) 2, pp. 1-25
This paper considers risks of the investment portfolio, which consist of distributed mortgages and sold European call options. It is assumed that the stream of the credit payments could fall by a jump. The time of the jump is modeled by the exponential distribution. We suggest that the returns...
Persistent link: https://www.econbiz.de/10011867389
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Extreme portfolio loss correlations in credit risk
Mühlbacher, Andreas; Guhr, Thomas - In: Risks : open access journal 6 (2018) 3, pp. 1-25
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence, it is of utmost importance to study the mutual dependence of losses for different creditors in the case of large, overlapping credit portfolios. We...
Persistent link: https://www.econbiz.de/10011890684
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Trading binary options using expected profit and loss metrics
Venter, Johannes Hendrik; Jongh, Pieter Juriaan de - In: Risks : open access journal 10 (2022) 11, pp. 1-21
Trading in binary options is discussed using an approach based on expected profit (EP) and expected loss (EL) as metrics of reward and risk of trades. These metrics are reviewed and the role of the EL/EP ratio as an indicator of quality of trades, taking risk tolerance into account, is...
Persistent link: https://www.econbiz.de/10014226063
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On the diversification of fixed income assets
Le Courtois, Olivier - In: Risks : open access journal 10 (2022) 2, pp. 1-21
This article introduces a new approach for dealing with the diversification/concentration risk of fixed income assets. Because Government bonds, corporate bonds, and mortgage backed securities constitute a large proportion of the assets of institutional investors in most countries, it is...
Persistent link: https://www.econbiz.de/10012806470
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Multivariate risk-neutral pricing of reverse mortgages under the Bayesian framework
Li, Jackie; Kogure, Atsuyuki; Liu, Jia - In: Risks : open access journal 7 (2019) 1/11, pp. 1-12
In this paper, we suggest a Bayesian multivariate approach for pricing a reverse mortgage, allowing for house price risk, interest rate risk and longevity risk. We adopt the principle of maximum entropy in risk-neutralisation of these three risk components simultaneously. Our numerical results...
Persistent link: https://www.econbiz.de/10012018623
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The optimum leverage level of the banking sector
Dewasurendra, Sagara; Judice, Pedro; Zhu, Qiji Jim - In: Risks : open access journal 7 (2019) 2/51, pp. 1-30
Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...
Persistent link: https://www.econbiz.de/10012019127
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Longevity risk management and the development of a value-based longevity index
Chang, Yang; Sherris, Michael - In: Risks : open access journal 6 (2018) 1, pp. 1-20
The design and development of post-retirement income products require the assessment of longevity risk, as well as a basis for hedging these risks. Most indices for longevity risk are age-period based. We develop and assess a cohort-based value index for life insurers and pension funds to manage...
Persistent link: https://www.econbiz.de/10011811547
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Immunization strategies for funding multiple inflation-linked retirement income benefits
Simões, Cláudia; Oliveira, Luís; Bravo, Jorge Miguel … - In: Risks : open access journal 9 (2021) 4, pp. 1-28
Protecting against unexpected yield curve, inflation, and longevity shifts are some of the most critical issues institutional and private investors must solve when managing post-retirement income benefits. This paper empirically investigates the performance of alternative immunization strategies...
Persistent link: https://www.econbiz.de/10012508594
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How do life insurers respond to a prolonged low interest rate environment? : a literature review
Suwanmalai, Wilaiporn; Zaby, Simon - In: Risks : open access journal 10 (2022) 8, pp. 1-16
Life insurers, whose contractual liabilities include providing minimum guaranteed interest rates to policyholders, are significantly affected by persistently low interest rates. Hence, this study reviews the literature on the prolonged low interest rate environment and its impact on the life...
Persistent link: https://www.econbiz.de/10013368257
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Bond yields, sovereign risk and maturity structure
González-Fernández, Marcos; González-Velasco, Carmen - In: Risks : open access journal 6 (2018) 4, pp. 1-25
The aim of this paper is to analyze the relation between maturity structure, sovereign bond yields and sovereign risk … relationship between sovereign bond yields, sovereign risk and the maturity structure of sovereign debt, regardless of the proxy … shortens the maturity structure of sovereign debt because it reduces the stock of long-term debt. The relationship between …
Persistent link: https://www.econbiz.de/10011906151