The subprime crisis was quite damaging for hedge funds. Using the local projection method (Jordà 2004, 2005, 2009), we forecast the dynamic responses of the betas of hedge fund strategies to macroeconomic and financial shocks-especially volatility and illiquidity shocks-over the subprime crisis...

In this article we identify risk and return profiles of two types of investment guaranteesin unit-linked life insurance products: an interest rate guarantee and a lookbackguarantee. This is done by comparing guarantee costs and performance for thematurity payoff and by testing the investment...

In this paper we analyze how the traditional life and pension contracts with a guaranteed rate of return can be optimized to increase customers’ welfare. Given that the contracts have to be priced correctly, we use individuals’ preferences to find the preferred design. Assuming CRRA utility,...

In this paper we show that there exist intergenerational cross-subsidization effects in guaranteed interest rate life and pension contracts as the different generations partially share the same reserves. Early generations build up bonus reserves, which are left with the company at expiry of the...

In this paper we deal with market-consistent valuation and hedging of insurance cash flows. We start with recalling traditional actuarial and financial pricing principles and we show how to integrate them into one arbitrage-free principle which leads to market-consistent valuation of the cash...

We establish a model of insurance pricing with the assumption that the insurance price, insurer investment returns, and insured losses are correlated stochastic processes. We consider the effect of demand on price where the objective of the pricing model is to maximize the expected utility of...

We integrate into a single optimization problem a risk measure, beyond the variance, and either arbitrage free real market quotations or financial pricing rules generated by an arbitrage free stochastic pricing model. A sequence of investment strategies such that the couple (expected-return,...

We derive risk-neutral option price formulas for plain-vanilla temperature futures derivatives on the basis of several multi-factor Ornstein-Uhlenbeck temperature models which allow for seasonality in the mean level and volatility. Our main innovation consists in an incorporation of omnipresent...

This paper examines the dimensions of risk in the Nigerian Business environment with the objective of identifying the various types of risks facing the businesses operating in Nigeria. Empirical data for the paper was secondary and collected from the Kaduna branch of the Nigerian Stock Exchange...

A mechanical rebalancing strategy, such as a monthly or quarterly reallocation towards fixed portfolio weights, is an active strategy. Winning asset classes are sold and losers are bought. During crises, when markets are often trending, this can lead to substantially larger drawdowns than a...