Browse Research
Viewing 2301 to 2325 of 7695 results
2006
We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. Stocks with high idiosyncratic volatility relative to the Fama and French (1993, Journal of Financial Economics 25, 2349) model have abysmally low average returns.
2006
Academics and practitioners have extensively studied Value-at-Risk (VaR) to propose a unique risk management technique that generates accurate VaR estimations for long and short trading positions and for all types of financial assets. However, they have not succeeded yet as the testing frameworks of the proposals developed, have not been widely accepted.
2006
This thesis has researched the application of economic capital for insurance firms. Whilst pension funds are basically similar to life insurance firms, their practical operation differs. For instance, pension funds are much more dependent on public policy choices and political developments. Also, pension funds have possibilities to limit indexing when developments turn out badly. This is an important steering parameter.
2006
The Monetary Control Act of 1980 requires the Federal Reserve System to provide payment services to depository institutions through the 12 Federal Reserve Banks at prices that fully reflect the costs a private-sector provider would incur, including a cost of equity capital (COE). Although Fama and French [Fama, E.F., French, K.R., 1997. Industry costs of equity.
2006
The literature on capital allocation is biased towards an asset modeling framework rather than an actuarial framework. The asset modeling framework leads to the proliferation of inappropriate assumptions about the effect of insurance line of business growth on aggregate loss distributions. This paper explains why an actuarial analog of the asset volume/return model should be based on a Lévy process.
2006
In this article, we consider the links between solvency, capital allocation, and fair rate of return in insurance. A method to allocate capital in insurance to lines of business is developed based on an economic definition of solvency and the market value of the insurer balance sheet. Solvency, and its financial impact, is determined by the value of the insolvency exchange option.
2006
The valuation of life insurance contracts using concepts from financial mathematics has recently attracted considerable interest in academia as well as among practitioners. In this paper, we will investigate the valuation of participating contracts, which are characterized by embedded interest rate guarantees and some bonus distribution rules.
2006
Making the assumption that the distribution of operational-loss severity has finite mean, Klaus Böcker and Jacob Sprittulla suggest a refined version of the analytical operational VAR theorem derived in Böcker and Klüppelberg (2005), which significantly reduces the approximation error to operational VAR.
2006
Natural disasters often have catastrophic risks on insurance companies as well as on the insured.
2006
The Mean Square Error of Prediction in the Chain Ladder Reserving Method (Muck and Murphy Revisited)
We revisit the famous Mack formula [2], which gives an estimate for the mean square error of prediction MSEP of the chain ladder claims reserving method: We define a time series model for the chain ladder method. In this time series framework we give an approach for the estimation of the conditional MSEP. It turns out that our approach leads to results that differ from the Mack formula.
2006
The unprecedented losses from Hurricane Katrina can be explained by two paradoxes. The safe development paradox is that in trying to make hazardous areas safer, the federal government in fact substantially increased the potential for catastrophic property damages and economic loss.
2006
The main purpose to study risk measures for portfolio vectors X=(X1,...,Xd) is to measure not only the risk of the marginals Xi separately but to measure the joint risk of X caused by the variation of the components and their possible dependence. Thus, an important property of risk measures for portfolio vectors is consistency with respect to various classes of convex and dependence orderings.
2006
We develop a flexible and analytically tractable framework which unifies the valuation of corporate liabilities, credit derivatives, and equity derivatives. We assume that the stock price follows a diffusion, punctuated by a possible jump to zero (default).
2006
This article presents the concept of a copula-based top-down approach in the field of financial risk aggregation. Selected copulas and their properties are presented. Copula parameter estimation and goodness-of-fit tests are explained and algorithms for the simulation of copulas and meta-distributions are provided.
2006
This paper deals with portfolio optimization under different risk constraints. We use a set of hedge funds where departure from normality are significant. We optimizethe expected return under standard deviation, semi-variance, VaR and expected shortfall (or CVaR) constraints. As far as the VaR is concerned, we compare different estimators.
2006
Due to the new regulatory guidelines known as Basel II for banking and Solvency 2 for insurance, the financial industry is looking for qualitative approaches to and quantitative models for operational risk. Whereas a full quantitative approach may never be achieved, in this paper we present some techniques from probability and statistics which no doubt will prove useful in any quantitative modelling environment.
2006
We study dynamic monetary risk measures that depend on bounded discrete-time processes describing the evolution of financial values. The time horizon can be finite or infinite. We call a dynamic risk measure time-consistent if it assigns to a process of financial values the same risk irrespective of whether it is calculated directly or in two steps backwards in time.
2006
The paper deals with the study of a coherent risk measure, which we call Weighted V@R. It is a risk measure of the form where μ is a probability measure on [0,1] and TV@R stands for Tail V@R. After investigating some basic properties of this risk measure, we apply the obtained results to the financial problems of pricing, optimization, and capital allocation.
2006
We propose a new procedure for the risk measurement of large portfolios.
2006
The longstanding Gibrat’ Law is tested for the U.S. Property and Liability (P-L) insurance market and the effects of guaranty fund system on the insurance prices are analyzed, using data sets for the years 1992 - 2000. First, based on a complete panel data and using Heckman’s (1979) two-stage methodology, this paper examines the relationship between corporate growth and firm size.
2006
A growing literature contends that, since returns are not normal, higherorder comoments matter to risk-averse investors. Fama and French (1993, 1995) find that nonmarket risk factors based on size and book-to-market ratio are priced by investors. We test the hypothesis that the Fama-French factors simply proxy for the pricing of higherorder comoments.
2006
This paper applies the extreme-value (EV) generalised pareto distribution to the extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses tail estimators from these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user's risk-aversion function.
2006
This paper evaluates the need for a government role in insuring natural and man-made catastrophes in the United States. Although insurance markets have been stressed by major natural catastrophes, such as Hurricane Katrina, government involvement in the market for natural catastrophe insurance should be minimized to avoid crowding-out more efficient private market solutions, such as catastrophe bonds.
2006
This paper conducts an event study analysis of the impact of operational loss events on the market values of banks and insurance companies, using the OpVar database. We focus on financial institutions because of the increased market and regulatory scrutiny of operational losses in these industries.
