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The regulator that is required to approve the statistical model and its parameters relies on the data that the insurance company provides. In case the regulator approves the model, he has some responsibility for it. The inability to validate the model, due to lack of resources or lack of...
Persistent link: https://www.econbiz.de/10013032665
We investigate fair (market-consistent and actuarial) valuation of insurance liability cash-flow streams in continuous time. We first consider one-period hedge-based valuations, where in the first step, an optimal dynamic hedge for the liability is set up, based on the assets traded in the...
Persistent link: https://www.econbiz.de/10012908555
Distorted expectations can be expressed as weighted averages of quantiles. In this note, we show that this statement is true, but that one has to be careful with the correct formulation of it. Furthermore, the proofs of the additivity property for distorted expectations of a comonotonic sum that...
Persistent link: https://www.econbiz.de/10013099160
In order to price multivariate derivatives, there is need for a multivariate stock price model. To keep the simplicity and attractiveness of the one-dimensional Black & Scholes model, one often considers a multivariate model where each individual stock follows a Black & Scholes model, but the...
Persistent link: https://www.econbiz.de/10013089471
For an arbitrage-free market with a single underlying asset, we investigate conditions under which the consecutive price levels are comonotonic. Furthermore, for an arbitrage-free market with n assets we investigate the consequences of assuming comonotonicity of the vector containing the price...
Persistent link: https://www.econbiz.de/10012925158
We consider a single period portfolio of n dependent credit risks that are subject to default during the period. We show that using stochastic loss given default random variables in conjunction with default correlations can give rise to an inconsistent set of assumptions for estimating the...
Persistent link: https://www.econbiz.de/10013159695
Tasche (1999) introduces a capital allocation principle where the capital allocated to each risk unit can be expressed in terms of its contribution to the conditional tail expectation (CTE) of the aggregate risk. Panjer (2002) derives a closed-form expression for this allocation rule in the...
Persistent link: https://www.econbiz.de/10012721603
Many types of insurance premium principles and/or risk measures can be characterized by means of a set of axioms, which in many cases are rather arbitrarily chosen and not always in accordance with economic reality. In the present paper we gener alize Yaari's risk measure by relaxing his axioms....
Persistent link: https://www.econbiz.de/10012761697