Related papers: Risk-insurance parity
We identify a new type of risk, common firm-level investor fears, from commonalities within the cross-sectional distribution of individual stock options. We define firm-level fears that link with upward price movements as good fears, and…
Distortion (Denneberg 1990) is a well known premium calculation principle for insurance contracts. In this paper, we study sensitivity properties of distortion functionals w.r.t. the assumptions for risk aversion as well as robustness…
Insurers underwrite risks: they calculate risks and decide on the insurance price. Insurers seem captivated by two trends enabled by Artificial Intelligence (AI). First, insurers could use AI for analysing more and new types of data to…
We consider the problem of representing claims for coherent risk measures. For this purpose we introduce the concept of (weak and strong) time-consistency with respect to a portfolio of assets, generalizing the one defined by Delbaen. In a…
The non-life insurance sector operates within a highly competitive and tightly regulated framework, confronting a pivotal juncture in the formulation of pricing strategies. Insurers are compelled to harness a range of statistical…
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.…
I propose a functional on the space of spectral risk measures that quantifies their ``degree of risk aversion''. This quantification formalizes the idea that some risk measures are ``more risk-averse'' than others. I construct the…
We propose a novel class of convex risk measures, based on the concept of the Fr\'echet mean, designed in order to handle uncertainty which arises from multiple information sources regarding the risk factors of interest. The proposed risk…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
Reinsurance counterparty credit risk (RCCR) is the risk of a loss arising from the fact that a reinsurance company is unable to fulfill her contractual obligations towards the ceding insurer. RCCR is an important risk category for insurance…
We provide a unifying way to analyze how risk aversion changes bidding in auctions by asking which bids become more attractive as bidders become more risk averse. In first-price auctions, under two payoff conditions--winning is never worse…
We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the…
The rapid diffusion of agentic AI has created a new coverage problem for commercial insurance: some AI-mediated losses are now affirmatively insured, some create silent-AI exposure under legacy cyber, technology errors-and-omissions (E&O),…
A classical result in risk measure theory states that every coherent risk measure has a dual representation as the supremum of certain expected value over a risk envelope. We study this topic in more detail. The related issues include: 1.…
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…
We develop a formalism for insurance profit optimisation for the in-force business constraint by regulatory and risk policy related requirements. This approach is applicable to Life, P&C and Reinsurance businesses and applies in all…
We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test the proposed reward-risk parity strategies and compare their performance with…
Equilibrium pricing has been proven to underlie the rational Insured expectancy of premia additivity for composition of policies fully covering independent risks.
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…