Browse Research
Viewing 2801 to 2825 of 7695 results
2004
Modern Integrated Risk Management (IRM) and Dynamic Financial Analysis (DFA) rely in great part on an appropriate modelling of the stochastic behaviour of the various risky assets and processes that influence the performance of the company under consideration. A major challenge here is a more substantial and realistic description and modelling of the various complex dependence structures between such risks showing up on all scales.
2004
We model consumption and dividend growth rates as containing (1) a small long-run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long-run growth prospects raise equity prices.
2004
Monetary measures of risk like Value at Risk or Worst Conditional Expectation assess the risk of financial positions. The existing risk measures are of a static, one period nature. In this paper, I define dynamic monetary risk measures and I present an axiomatic approach that extends the class of coherent risk measures to the dynamic framework.
2004
The German flood disaster of summer 2002 highlighted a dilemma concerning insurance against damages caused by natural forces. On the one hand, mindful of the rising incidence of natural disasters, private insurance companies are increasingly withdrawing coverage against natural catastrophes such as wind storms and floods.
2004
The terrorist attacks during the past decade in London, Israel, the United States and elsewhere have spurned an interest in understanding not only how governments can mitigate terrorism risk but also how governments might help finance future losses.
2004
The author places the discounting of loss reserves for investment income within a financial economics context. This enables the evaluation of a loss reserve containing a security margin, such as to produce p% confidence in adequacy, taking account of both asset and liability risks. This loss reserve is expressed as a multiple of the economic value of the liabilities.
2004
The paper overviews the application of existing actuarial techniques to operational risk. It considers how, working in conjunction with other experts, actuaries can develop a new framework to monitor/review, establish context, identify, understand and decide what to do in terms of the management and mitigation of operational risk.
2004
Tsanakas and Barnett [Insurance: Mathematics and Economics 33 (2003) 239] employed concepts from cooperative game theory [Aumann and Shapley, Values of Non-Atomic Games. Princeton University Press, Princeton] for the allocation of risk capital to portfolios of pooled liabilities, when distortion risk measures [Insurance: Mathematics and Economics 21 (2) (1997) 173] are used.
2004
This is the first study that uses Merton's (1974) option pricing model to compute default measures for individual firms and assess the effect of default risk on equity returns. The size effect is a default effect, and this is also largely true for the book-to-market (BM) effect. Both exist only in segments of the market with high default risk. Default risk is systematic risk.
2004
This paper discusses a number of methods of allocating capital to business units, for example, line of business, profit center, etc. The goals of capital allocation include testing the profitability of business units and determining which units could best be grown to add value to the firm. Methods of approaching these questions without allocating capital are included in the discussion.
2004
We apply the principle of equivalent utility to calculate the indifference price of the writer of a contingent claim in an incomplete market. To recognize the long-term nature of many such claims, we allow the short rate to be random in such a way that the term structure is affine. We also consider a general diffusion process for the risky stock (index) in our market.
2004
This paper develops a new method to allocating capital. First the expected value of default is allocated based on the economic value of payo to a policy, counting the cost of insolvency. Then the capital is allocated accordingly so that a policy's contribution to the default value equals its allocated default value. Only part of the capital is allocated to the policies, the rest is attributed to the risky assets.
2004
This paper examines the role of the federal government in the market for terrorism reinsurance. We investigate the stock price response of affected industries to a sequence of thirteen events culminating in the enactment of the Terrorism Risk Insurance Act (TRIA) of 2002.
2004
The Encyclopedia of Actuarial Science presents a timely and comprehensive body of knowledge designed to serve as an essential reference for the actuarial profession and all related business and financial activities, as well as researchers and students in actuarial science and related areas.
2004
Due to the ability to handle specific characteristics of economics and finance forecasting problems like e.g.
2004
Drawing on material from a recent World Bank conference, Eugene N. Gurenko assembles some of the foremost reinsurance and risk management experts from industry and academia. The chapters thoroughly explore subjects such as country risk assessment, risk modelling, risk transfer methods and national reinsurance.
2004
For social scientists and those affected directly or indirectly by natural disasters, 52 articles reproduced from their publication in professional journals and other publications during the second half of the 20th century consider hazards and risk from an economic perspective.
2003
This paper examines the implications of market microstructure for asset pricing. I argue that asset pricing ignores the central fact that asset prices evolve in markets. Markets provide liquidity and price discovery, and I argue that asset pricing models need to be recast in broader terms to incorporate the transactions costs of liquidity and the risks of price discovery.
2003
This paper reports fairly accurate simulations of insurance-linked securities within an arbitrage-free framework, while accounting for catastrophic events and allowing for stochastic interest rates. Assessing these contingent claims exhibits features of instability rooted in the discontinuity of the payoffs of binary options around their threshold, which is magnified by possible jumps in their underlying dynamics.
2003
We consider a dynamic reinsurance market, where the traded risk process is driven by a jump-diffusion and where claim amounts are unbounded. These markets are known to be incomplete, and there are typically infinitely many martingale measures. In this case, no-arbitrage pricing theory can typically only provide wide bounds on prices of reinsurance claims.
2003
An application of Maximum Likelihood Estimation (MLE) theory is demonstrated for modeling the distribution of loss development based on data available in the common triangle format. This model is used to estimate future loss emergence, and the variability around that estimate. The value of using an exposure base to supplement the data in a development triangle is demonstrated as a means of reducing variability.
2003
Actuaries are increasingly finding more applications for stochastic simulation in pricing, reserving, DFA, and other insurance and financial engineering problems. For instance, stochastic simulation has gained acceptance as a pricing tool for property catastrophe coverage in the insurance, reinsurance, broker, and investment communities.
2003
Stochastic models for interest rates are reviewed and fitting methods are discussed. Tests for the dynamics of short-term rates are based on model fits. A method of testing yield curve distributions for use in insurer asset scenario generators is introduced. This uses historical relationships in the conditional distributions of yield spreads given the short-term rate. As an illustration, this method is used to test a few selected models.
2003
A stochastic cash flow depends on a random outcome. Since insurance and reinsurance contracts in exchange for financial considerations provide financial compensations against random outcomes, their compensations are perfect examples of stochastic cash flows. This paper develops a theory for the valuation of such cash flows from the four principles of present value, utility, optimum, and equilibrium.
