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Viewing 1751 to 1775 of 7690 results
2008
The current financial crisis underscores the need for companies to take a sobering look at their approach to risk management. Among the many lessons to be learned, one is immediately clear: The subprime debacle represents a failure in risk management, rather than a failure of risk management.
Keywords: Enterprise Risk Management
2008
Financial crises are nothing new. What is unique and sobering is the far greater speed with which the current situation has evolved from a weakening of the U.S. housing market into a full-blown, global economic meltdown. Also new this time is how quickly the fallout spread beyond the financial sector into all areas of the economy.
2008
This year’s financial crisis was described by Alan Greenspan as a once-in-a-century event. Similarly, the floods in the Midwest of this past summer were described as 500-year floods. Both characterizations, and both events, serve to remind us of the difficulty in predicting such calamities and in gauging their ultimate scope and effects. Just think: How many once-in-a-century events have occurred this decade?
2008
What a roller coaster ride the past year has been! Occasionally we had respites as the financial markets gained altitude. This made the next day’s drop even deeper and scarier. Volatility in the system has increased, not only between months and days but from morning to afternoon. Are we at the bottom now? Who knows?
2008
Market observers have never been as skeptical on financial service firms’ capital standing as they are today. As The Hartford released its third quarter earnings on Oct. 30, 2008, its stock price fell almost 50 percent when it reported a $2.6 billion quarterly loss. Many believe this was driven by its failure to convince the market that it was sufficiently capitalized to survive the financial crisis.
2008
We have been observing the mortgage crisis over the recent months. To some extent, we are like Will Rogers in that all we know about the crisis “is what we read in the newspapers.” Even though we lack the practitioner’s in-depth knowledge of the mortgage industry, it does seem to us that lessons we have learned in the property-casualty insurance industry have relevance to the mortgage crisis.
2008
The financial crisis that began in 2007 and accelerated greatly in 2008 has posed a unique challenge for the regulators of financial intermediaries. The speed and severity of the events that transpired have been quite a shock to the financial and political system in the United States, and subsequently, worldwide.
2008
Risk management lessons abound from the current crisis. Understanding the lessons requires a clear assessment of the roots of the crisis. A simplified assessment of the underpinnings of the crisis sheds light on pivotal mistakes and offers valuable learnings.
2008
Most people should know how to end that statement. Leading up to the current financial crisis, many looked at real estate prices in some significant areas of the United States and concluded that we were in an asset-price bubble. Yet, despite that appearance, we continued to lend money based on prices then prevalent. Now, the bursting of the bubble has sent shock waves around the world.
Keywords: Enterprise Risk Management
2008
The liquidity crisis and the insufficient depth of the market led to a strong correlation crisis: many risks that could be considered as close to mutually independent in the classical regime suddenly became strongly positively dependent. More correlation crises may happen in the future.
2008
Does the credit crisis mean the heralded Age of the Quant has passed? Much of the blame for the current credit crisis is being laid at the feet of the analysts responsible for modeling and evaluating the innovative debt securities driving the massive losses for financial institutions. How was the modeling of these securities so wrong?
Keywords: Enterprise Risk Management
2008
As risk professionals, we know that managing leverage is the heart of risk management. Leveraged businesses naturally tend to use excessive leverage. We deal with regulations that exist in order to dampen the tendency among insurance companies to become overextended during the underwriting “soft market.” We observed that hedge funds, investment banks and private equity funds used excessive leverage as the credit boom went on.
2008
Why are we in a financial crisis and how do we get out of it?
2008
Interest rates rose from 2004 through 2007, so adjustable mortgage rates increased and many borrowers fell behind. After home prices topped out in 2006, speculators and some buyers who had overstretched found it impossible to refinance. This caused mortgage insurance claims.
2008
We model a claims process as a random time to occurrence followed by a random time to a single payment. Since accident year payout data available is aggregated by development year rather than by payment lag, we calculate those probabilities and parameterize the payout lag time distribution to maximize the fit to data. General formulae are given for any distribution, but we use a piecewise linear continuous distribution.
2008
In this paper, we compare the point of view of the regulator and the investors about the required solvency level of an insurance company. We assume that the required solvency level is determined using the Tail Value at Risk and analyze the diversification benefit, both on the required capital and on the residual risk, when merging risks. To describe the dependence structure, we use a range of various copulas.
2008
This paper proposes a method for the continuous random modeling of loss index triggers for cat bonds.
2008
“Munich Chain Ladder” by Dr. Quarg and Dr. Mack is being reprinted in Variance to give this important paper wider visibility within the actuarial community. The editors of Variance invited the authors to submit their paper for republication because we believe that the techniques described in their work should be known to all actuaries doing reserve analysis. We also hope to stimulate further research in this area.
2008
One of the most commonly used data mining techniques is decision trees, also referred to as classification and regression trees or C&RT. Several new decision tree methods are based on ensembles or networks of trees and carry names like TreeNet and Random Forest. Viaene et al.
2008
A variety of methods to measure the variability of property-liability loss reserves have been developed to meet the requirements of regulators, rating agencies and management. These methods focus on nominal, undiscounted reserves, in line with statutory reserve requirements. Recently, though, there has been a trend to consider the fair value, or economic value, of loss reserves.
2008
In the current financial markets turmoil, it is tempting to ask whether things might have turned out differently. ‘What if’ questions were a favorite of a history professor under whom I once studied. They of course are speculative, but in this case I think the pain in our financial markets would have been less if more actuaries had been involved. I offer 10 reasons.
2008
We have been observing the mortgage crisis over the recent
months. To some extent, we are like Will Rogers in that
all we know about the crisis “is what we read in the newspapers.” Even though we lack the practitioner’s in-depth knowledge of the mortgage industry, it does seem to us that lessons we have learned in the property-casualty insurance industry have relevance to the mortgage crisis.
2008
We propose a capital allocation method for insurance companies. The amount of capital is directly related to the default risk. The expected value of default can be distributed among the liabilities based on the rule of asset payoff at the time of default. We derive a capital allocation scheme from this allocation of the expected default. Assets, liabilities, and other risky items on the balance sheet are treated in a uniform framework.
2008
This note briefly describes ROOT, which is a free and open-source data mining tool developed by CERN, the same lab where the World Wide Web (WWW) was invented. Development of ROOT was motivated by the necessity to address the challenges posed by the new generation High Energy Physics experiments, which are expected to produce and analyze thousands of terabytes of very complex data every year.
2008
After Hurricane Andrew the U.S. Congress entertained proposals to allow insurers to employ tax-deferred loss reserves. Interest was strong at first, but as the events receded interest waned. However, after the most recent severe hurricane seasons the proposals are again being discussed. In this paper we examine the institution of catastrophe loss reserves in a stylized model of insurance provisions.
