Related papers: Actuarial-consistency and two-step actuarial valua…
We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically…
Recent theoretical results establish that time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial…
We are concerned with the market-consistent valuation of lifelong health insurance products, which are subject to adjustments derived from the actuarial equivalence principle and driven by (medical) inflation. Such products are…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
In most cases, insurance contracts are linked to the financial markets, such as through interest rates or equity-linked insurance products. To motivate an evaluation rule in these hybrid markets, Artzner et al. (2022) introduced the notion…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
The paper provides a comprehensive overview of modeling and pricing cyber insurance and includes clear and easily understandable explanations of the underlying mathematical concepts. We distinguish three main types of cyber risks:…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…
The paper has 2 main goals: 1. We propose a variant of the CAPM based on coherent risk. 2. In addition to the real-world measure and the risk-neutral measure, we propose the third one: the extreme measure. The introduction of this measure…
Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environmental and social sustainability, i.e. environmental,…
Several authors have recently developed risk-sensitive policy gradient methods that augment the standard expected cost minimization problem with a measure of variability in cost. These studies have focused on specific risk-measures, such as…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
This paper approaches the definition and properties of dynamic convex risk measures through the notion of a family of concave valuation operators satisfying certain simple and credible axioms. Exploring these in the simplest context of a…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected…
We propose a new procedure for the risk measurement of large portfolios. It employs the following objects as the building blocks: - coherent risk measures introduced by Artzner, Delbaen, Eber, and Heath; - factor risk measures introduced in…
The valuation of over-the-counter derivatives is subject to a series of valuation adjustments known as xVA, which pose additional risks for financial institutions. Associated risk measures, such as the value-at-risk of an underlying…
In the second part of our series we suggest new definitions of credit bond duration and convexity that remain consistent across all levels of credit quality including deeply distressed bonds and introduce additional risk measures that are…
We discuss a weighted estimation of correlation and covariance matrices from historical financial data. To this end, we introduce a weighting scheme that accounts for similarity of previous market conditions to the present one. The…