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To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
This paper introduces an innovative framework for the periodic evaluation of defined-contribution pension funds. The performance of the pension fund is evaluated not only at retirement, but also within the interim periods. In contrast to…
I present a simple numerical model based on iteratively updating subgroups of a population, individually modeled by nonnegative real numbers, by a constant decay factor; however, at each iteration, one group is selected to instead be…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
The stochastic system approach to causality is applied to situations where the risk of death is not negligible. This approach grounds causality on physical laws, distinguishes system and observation and represents the system by multivariate…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Solvency II Directive 2009/138/EC requires an insurance and reinsurance undertakings assessment of a Solvency Capital Requirement by means of the so-called "Standard Formula" or by means of partial or full internal models. Focusing on the…
We study the multiplicative hazards model with intermittently observed longitudinal covariates and time-varying coefficients. For such models, the existing ad hoc approach, such as the last value carried forward, is biased. We propose a…
This paper presents a new copula to model dependencies between insurance entities, by considering how insurance entities are affected by both macro and micro factors. The model used to build the copula assumes that the insurance losses of…
The significance of mortality modeling extends across multiple research areas, ranging from life insurance valuation to optimal lifetime decision-making. Existing approaches, such as mortality laws and factor-based models, often fall short…
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…
The subject of the present article is the study of correlations between large insurance companies and their contribution to systemic risk in the insurance sector. Our main goal is to analyze the conditional structure of the correlation on…
In the current insurance literature, prediction of insurance claims in the regression problem is often performed with a statistical model. This model-based approach may potentially suffer from several drawbacks: (i) model misspecification,…
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…
Traditional credibility analysis of risks in insurance is based on the random effects model, where the heterogeneity across the policyholders is assumed to be time-invariant. One popular extension is the dynamic random effects (or…
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…
To make medium- and long-term insurance products attractive, it is essential to enable participation in stock market returns. However, to eliminate downside risk, guarantees must be included, which naturally leads to the challenge of…
Frailty models are often the model of choice for heterogeneous survival data. A frailty model contains both random effects and fixed effects, with the random effects accommodating for the correlation in the data. Different estimation…
There have been significant efforts devoted to solving the longevity risk given that a continuous growth in population ageing has become a severe issue for many developed countries over the past few decades. The Cairns-Blake-Dowd (CBD)…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…