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Opaque Liabilities, Learning, and the Cost of Equity Capital for Insurers

Chiang, Chia-Chun - 2019

Analyzing the top 100 U.S. property-liability insurers, we find that the cost of equity capital is negatively related to insurers' underwriting performance, but not their investment performance. The difference is attributable to opaque insurer liabilities and investor learning. We also find that...

Persistent link: https://www.econbiz.de/10012900518

Estimating the Cost of Equity Capital for Insurance Firms with Multi-Period Asset Pricing Models

Barinov, Alexander - 2018

. Further, insurers are sensitive to volatility risk (the risk of losses when volatility goes up), but not to insurance …

Persistent link: https://www.econbiz.de/10012913827

Asset pricing of financial institutions : the cross-section of expected stock returns in the property/liability insurance industry

Ben Ammar, Semir; Eling, Martin; Milidonis, Andreas - 2015

We conduct a comprehensive asset pricing analysis for the U.S. property/liability insurance industry using monthly data … the returns of property/liability insurance stocks in a satisfactory way. We adapt the model proposed by Adrian, Friedman …, and Muir (2015) for financial institutions and define an insurance-specific five-factor asset pricing model (INS5), which …

Persistent link: https://www.econbiz.de/10011345060

The Price of Higher Order Catastrophe Insurance : The Case of VIX Options

Eraker, Bjorn - 2020

We develop an equilibrium pricing model aimed at explaining observed characteristics in equity returns, VIX futures and VIX options data. To derive our model we first specify a general framework based on affine jump-diffusive state-dynamics and representative agent endowed with Duffie-Epstein...

Persistent link: https://www.econbiz.de/10012843980

Implied Growth Horizons and the Cost of Equity

Mangelmans, Job - 2016

We introduce a straightforward method to estimate the implied cost of equity, allowing growth horizons to fluctuate both cross-sectionally and through time. Our results show substantial dispersion of implied growth horizons in cross-sections and time-series for US firms in the years 1988-2013....

Persistent link: https://www.econbiz.de/10012992949

Valuing Variable Annuity Guarantees on Multiple Assets

Ziveyi, Jonathan - 2015

Guarantees embedded variable annuity contracts exhibit option-like payoff features and the pricing of such instruments naturally leads to risk neutral valuation techniques. This paper considers the pricing of two types of guarantees; namely, the Guaranteed Minimum Maturity Benefit and the...

Persistent link: https://www.econbiz.de/10013011325

Life Insurer Cost of Equity with Asymmetric Risk Factors

Bajtelsmit, Vickie - 2015

This study presents an improved model for estimating life insurer cost of capital with the inclusion of upside and downside risk factors and controlling for life insurer characteristics. Although various asymmetric measures of market risk have been shown to be priced factors for the broader...

Persistent link: https://www.econbiz.de/10013024199

Catastrophe Bonds as Innovations in the CAPM

Su, Fei - 2015

Catastrophe bonds are insurance linked securities that transfer catastrophe risks from the insurance industry to … insurance premia are investigated …

Persistent link: https://www.econbiz.de/10013013809

Life Insurer Cost of Equity with Asymmetric Risk Factors

Bajtelsmit, Vickie - 2014

factors. Given the life insurance industry's unique role in providing long term protection to U.S. households and the relative …

Persistent link: https://www.econbiz.de/10013058533

Marking to Market, Liquidity and Financial Stability

Plantin, Guillaume; Sapra, Haresh; Shin, Hyun Song - 2010

This paper explores the financial stability implications of mark-to-market accounting, in particular its tendency to amplify financial cycles and the "reach for yield". Market prices play a dual role. Not only do they serve as a signal of the underlying fundamentals and the actions taken by...

Persistent link: https://www.econbiz.de/10014047345