Related papers: State Space Vasicek Model of a Longevity Bond
The paper analyzes the mathematics of the relationship between the default risk and yield-to-maturity of a coupon bond. It is shown that the yield-to-maturity is driven not only by the default probability and recovery rate of the bond but…
The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate…
A probability model is presented for the dynamics of mutation-selection balance in a haploid infinite-population infinite-sites setting sufficiently general to cover mutation-driven changes in full age-specific demographic schedules. The…
We provide forecasts for mortality rates by using two different approaches. First we employ dynamic non-linear logistic models based on Heligman-Pollard formula. Second, we assume that the dynamics of the mortality rates can be modelled…
The collective risk model (CRM) for frequency and severity is an important tool for retail insurance ratemaking, macro-level catastrophic risk forecasting, as well as operational risk in banking regulation. This model, which is initially…
In this paper, we are concerned with the valuation of Catastrophic Mortality Bonds and, in particular, we examine the case of the Swiss Re Mortality Bond 2003 as a primary example of this class of assets. This bond was the first…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
We develop a novel filtering and estimation procedure for parametric option pricing models driven by general affine jump-diffusions. Our procedure is based on the comparison between an option-implied, model-free representation of the…
A retention strategy based on an enlightened lapse model is a powerful profitabilitylever for a life insurer. Some machine learning models are excellent at predicting lapse,but from the insurer's perspective, predicting which policyholder…
The aim of this paper is to propose a new methodology that allows forecasting, through Vasicek and CIR models, of future expected interest rates (for each maturity) based on rolling windows from observed financial market data. The novelty,…
Many insurance products and pension plans provide benefits which are related to couples, and thus under influence of the survival status of two lives. Some studies show the future lifetime of couples is correlated. Three reasons are…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
In this paper, we study option pricing under Vasicek Model by a Hamiltonian approach. Since the interest rate changes with time, we split the time to maturity into infinite steps, and the matrix element during each step could be calculated…
Insurance and annuity products covering several lives require the modelling of the joint distribution of future lifetimes. In the interest of simplifying calculations, it is common in practice to assume that the future lifetimes among a…
Yield curve modeling is an essential problem in finance. In this work, we explore the use of Bayesian statistical methods in conjunction with Nelson-Siegel model. We present the hierarchical Bayesian model for the parameters of the…
If individuals at the highest mortality risk are also least likely to lapse a life insurance policy, then lapse-supported premiums magnify adverse selection costs. As an example, we model 'Term to 100' contracts, and risk as revealed by…
We wish to verify that the mortality deceleration (or decrease) is a consequence of the bending of the shape parameter at old ages. This investigation is based upon the Weon model (the Weibull model with an age-dependent shape parameter)…
In this paper, we provide a comprehensive cross-country validation study of compositional mortality modeling and forecasting methods. Thus, we consider two one-to-one transformations: the cumulative distribution function and the centered…
We propose a new framework for modeling stochastic local volatility, with potential applications to modeling derivatives on interest rates, commodities, credit, equity, FX etc., as well as hybrid derivatives. Our model extends the…