Related papers: Polynomial Diffusion Models for Life Insurance Lia…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
In this work, we present a numerical method based on a sparse grid approximation to compute the loss distribution of the balance sheet of a financial or an insurance company. We first describe, in a stylised way, the assets and liabilities…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
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…
Index-based hedging solutions are used to transfer the longevity risk to the capital markets. However, mismatches between the liability of the hedger and the hedging instrument cause longevity basis risk. Therefore, an appropriate…
We consider a time-consistent mean-variance portfolio selection problem of an insurer and allow for the incorporation of basis (mortality) risk. The optimal solution is identified with a Nash subgame perfect equilibrium. We characterize an…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its…
In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
We consider the insurance company as a physical system which is immersed in its environment (the financial market). The insurer company interacts with the market by exchanging the money through the payments for loss claims and receiving the…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
Economic variables play important roles in any economic model, and sudden and dramatic changes exist in the financial market and economy. For this reason, to price and hedge equity-linked life insurance products, including segregated funds…
The probability minimizing problem of large losses of portfolio in discrete and continuous time models is studied. This gives a generalization of quantile hedging presented in [3].
We study large and moderate deviations for a life insurance portfolio, without assuming identically distributed losses. The crucial assumption is that losses are bounded, and that variances are bounded below. From a standard large…
Maintaining the predictive performance of pricing models is challenging when insurance portfolios and data-generating mechanisms evolve over time. Focusing on non-life insurance, we adopt the concept-drift terminology from machine learning…
Insurance data can be asymmetric with heavy tails, causing inadequate adjustments of the usually applied models. To deal with this issue, hierarchical models for collective risk with heavy-tails of the claims distributions that take also…
With the rise of emerging risks, model uncertainty poses a fundamental challenge in the insurance industry, making robust pricing a first-order question. This paper investigates how insurers' robustness preferences shape competitive…
We construct a binomial model for a guaranteed minimum withdrawal benefit (GMWB) rider to a variable annuity (VA) under optimal policyholder behaviour. The binomial model results in explicitly formulated perfect hedging strategies funded…
Dependence among multiple lifetimes is a key factor for pricing and evaluating the risk of joint life insurance products. The dependence structure can be exposed to model uncertainty when available data and information are limited. We…