Related papers: Capital allocation and risk appetite under Solvenc…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
In this paper we study data from the yearly reports the four major Swedish non-life insurers have sent to the Swedish Financial Supervisory Authority (FSA). We aim at finding marginal distributions of, and dependence between, losses on the…
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
The profit and loss (p&l) attrition for each business year into different risk or risk factors (e.g., interest rates, credit spreads, foreign exchange rate etc.) is a regulatory requirement, e.g., under Solvency 2. Three different…
To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal…
The study deals with the assessment of risk measures for Health Plans in order to assess the Solvency Capital Requirement. For the estimation of the individual health care expenditure for several episode types, we suggest an original…
To quantify the operational risk capital charge under the current regulatory framework for banking supervision, referred to as Basel II, many banks adopt the Loss Distribution Approach. There are many modeling issues that should be resolved…
The underlying stochastic nature of the requirements for the Solvency II regulations has introduced significant challenges if the required calculations are to be performed correctly, without resorting to excessive approximations, within…
Since 2016 the operation of insurance companies in the European Union is regulated by the Solvency II directive. According to the EU directive the capital requirement should be calculated as a 99.5\% of Value at Risk. In this study, we…
We consider the risk sharing problem for capital requirements induced by capital adequacy tests and security markets. The agents involved in the sharing procedure may be heterogeneous in that they apply varying capital adequacy tests and…
Risk contributions of portfolios form an indispensable part of risk adjusted performance measurement. The risk contribution of a portfolio, e.g., in the Euler or Aumann-Shapley framework, is given by the partial derivatives of a risk…
This paper studies the multilevel Monte-Carlo estimator for the expectation of a maximum of conditional expectations. This problem arises naturally when considering many stress tests and appears in the calculation of the interest rate…
This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…
The development of Distributional Reinforcement Learning (DRL) has introduced a natural way to incorporate risk sensitivity into value-based and actor-critic methods by employing risk measures other than expectation in the value function.…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
In this work, inspired by the Archer-Mouy-Selmi approach, we present two methodologies for scoring the stress test scenarios used by CCPs for sizing their Default Funds. These methodologies can be used by risk managers to compare different…
Equity risk premium is a central component of every risk and return model in finance and a key input to estimate costs of equity and capital in both corporate finance and valuation. An article by Damodaran examines three broad approaches…
After several years of development, the Solvency II-project has finally been set to work in the European Union with the beginning of the year 2016. This has caused massive changes in the regional legislative supervisory acts. One new aspect…