We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents...

In this paper, we test the efficiency of least-squares Monte Carlo method to estimate capital requirements in life insurance. We choose a simplified Gaussian evaluation framework where closed-form formulas are available and allow us to obtain solid benchmarks. Extensive numerical experiments...

Financial stability is the key objective that sustains and empowers investments and economic groth, or scatters the opportunities when lacking. As growth translates to profitability, and profitability is dependent upon solvalibility, the need for a deep knowledge of all potential risks surfaces....

The purpose of the paper is to provide some support to the thesis that insurance may reduce the cost of capital in a company by influencing both the cost of capital components and the need for rising capital. The problem is here perceived from two perspectives the classical concept related to...

Being active in both the insurance sector and the banking sector, financial conglomerates intrinsically increase the interconnections between the banking sector and the insurance sector. We address two main concerns about financial conglomerates using a unique database on bilateral exposures...

The value of information regarding risk class for a monopoly insurer and its customers is examined in both symmetric and asymmetric information environments. A monopolist always prefers contracting with uninformed customers as this maximizes the rent extracted under symmetric information while...

In the classical expected utility framework, a problem of optimal insurance design with a premium constraint is equivalent to a problem of optimal insurance design with a minimum expected retention constraint. When the insurer has ambiguous beliefs represented by a non-additive probability...

This paper studies the dependence between coupled lives, i.e., the spouses' dependence, across different generations, and its effects on prices of reversionary annuities in the presence of longevity risk. Longevity risk is represented via a stochastic mortality intensity. We find that a...