Related papers: On the Estimation of Own Funds for Life Insurers: …
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…
Flow matching models effectively represent complex distributions, yet estimating expectations of functions of their outputs remains challenging under limited sampling budgets. Independent sampling often yields high-variance estimates,…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Wrong-Way Risk (WWR) is an important component in Funding Valuation Adjustment (FVA) modelling. Yet, the standard assumption is independence between market risks and the counterparty defaults and funding costs. This typical industrial…
This paper presents a novel approach to optimizing profit margins in non-life insurance markets through a gradient descent-based method, targeting three key objectives: 1) maximizing profit margins, 2) ensuring conversion rates, and 3)…
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our…
With a focus on linear models with smooth functional covariates, we propose a penalization framework (SACR) based on the nonzero centered ridge, where the center of the penalty is optimally reweighted in a supervised way, starting from the…
This paper examines the usefulness of high frequency data in estimating the covariance matrix for portfolio choice when the portfolio size is large. A computationally convenient nonlinear shrinkage estimator for the integrated covariance…
We propose two variants of the Smith-Wilson method for practical application in the insurance industry. Our first variant relaxes the Smith-Wilson energy and can be used to incorporate less reliable market data with a certain weight rather…
In this paper we introduce a novel approach to risk estimation based on nonlinear factor models - the "StressVaR" (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. Its…
Indirect experiments provide a valuable framework for estimating treatment effects in situations where conducting randomized control trials (RCTs) is impractical or unethical. Unlike RCTs, indirect experiments estimate treatment effects by…
We develop a theory for valuing non-diversifiable mortality risk in an incomplete market. We do this by assuming that the company issuing a mortality-contingent claim requires compensation for this risk in the form of a pre-specified…
Multifidelity modeling has been steadily gaining attention as a tool to address the problem of exorbitant model evaluation costs that makes the estimation of failure probabilities a significant computational challenge for complex real-world…
In this paper, we discuss the impact of some mortality data anomalies on an internal model capturing longevity risk in the Solvency 2 framework. In particular, we are concerned with abnormal cohort effects such as those for generations 1919…
Basel II and Solvency 2 both use the Value-at-Risk (VaR) as the risk measure to compute the Capital Requirements. In practice, to calibrate the VaR, a normal approximation is often chosen for the unknown distribution of the yearly log…
The linear quadratic regulator (LQR) problem is a cornerstone of automatic control, and it has been widely studied in the data-driven setting. The various data-driven approaches can be classified as indirect (i.e., based on an identified…
This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality.…
General wrong way risk (WWR) estimation is necessary for regulatory CVA capital and useful for pricing CVA and FVA. We introduce a model independent method for calculating WWR and update the definition of WWR to deal with the lack of…
Surrender poses one of the major risks to life insurance and a sound modeling of its true probability has direct implication on the risk capital demanded by the Solvency II directive. We add to the existing literature by performing…
We propose an efficient, accurate and reliable simulation scheme for the stochastic-alpha-beta-rho (SABR) model. The two challenges of the SABR simulation lie in sampling (i) integrated variance conditional on terminal volatility and (ii)…