2019 June - 36 articles
To reduce the negative impacts of risks in farming due to climate change, the government implemented agricultural production cost insurance in 2015. Although a huge amount of subsidy has been allocated by the government (80 percent of the premium), f...
XGBoost is recognized as an algorithm with exceptional predictive capacity. Models for a binary response indicating the existence of accident claims versus no claims can be used to identify the determinants of traffic accidents. This study compared t...
It is known that the classical ruin function under exponential claim-size distribution depends on two parameters, which are referred to as the mean claim size and the relative security loading. These parameters are assumed to be unknown and random, t...
In this research, trade credit is analysed form a seller (supplier) perspective. Trade credit allows the supplier to increase sales and profits but creates the risk that the customer will not pay, and at the same time increases the risk of the suppli...
One of the key components of counterparty credit risk (CCR) measurement is generating scenarios for the evolution of the underlying risk factors, such as interest and exchange rates, equity and commodity prices, and credit spreads. Geometric Brownian...
This work examines apportionment of multiplicative risks by considering three dominance orderings: first-degree stochastic dominance, Rothschild and Stiglitz’s increase in risk and downside risk increase. We use the relative nth-degree risk ave...
This paper discusses ambiguity in the context of single-name credit risk. We focus on uncertainty in the default intensity but also discuss uncertainty in the recovery in a fractional recovery of the market value. This approach is a first step toward...
We investigate a shot noise process with subexponential shot marks occurring at renewal epochs. Our main result is a precise asymptotic formula for its tail probability. In doing so, some recent results regarding sums of randomly weighted subexponent...
In the past two decades increasing computational power resulted in the development of more advanced claims reserving techniques, allowing the stochastic branch to overcome the deterministic methods, resulting in forecasts of enhanced quality. Hence,...
This is Part III of a series of papers which focus on a general framework for portfolio theory. Here, we extend a general framework for portfolio theory in a one-period financial market as introduced in Part I [Maier-Paape and Zhu, Risks 2018, 6(2),...
Stochastic mortality models have been developed for a range of applications from demographic projections to financial management. Financial risk based models built on methods used for interest rates and apply these to mortality rates. They have the a...
I document a sizeable bias that might arise when valuing out of the money American options via the Least Square Method proposed by Longstaff and Schwartz (2001). The key point of this algorithm is the regression-based estimate of the continuation val...
The primary objective of this work is to analyze model based Value-at-Risk associated with mortality risk arising from issued term life assurance contracts and to compare the results with the capital requirements for mortality risk as determined usin...
In the presence of recovery risk, the recovery rate is a random variable whose risk-neutral expectation can be inferred from the prices of defaultable instruments. I extract market-implied recovery rates from the term structures of credit default swa...
Quantiles of probability distributions play a central role in the definition of risk measures (e.g., value-at-risk, conditional tail expectation) which in turn are used to capture the riskiness of the distribution tail. Estimates of risk measures are...
The beta coefficient plays a crucial role in finance as a risk measure of a portfolio in comparison to the benchmark portfolio. In the paper, we investigate statistical properties of the sample estimator for the beta coefficient. Assuming that both t...
We present several fast algorithms for computing the distribution of a sum of spatially dependent, discrete random variables to aggregate catastrophe risk. The algorithms are based on direct and hierarchical copula trees. Computing speed comes from t...
Risk models developed on one dataset are often applied to new data and, in such cases, it is prudent to check that the model is suitable for the new data. An important application is in the banking industry, where statistical models are applied to lo...
An accurate assessment of the risk of extreme environmental events is of great importance for populations, authorities and the banking/insurance/reinsurance industry. Koch (2017) introduced a notion of spatial risk measure and a corresponding set of...
We study the optimal excess-of-loss reinsurance problem when both the intensity of the claims arrival process and the claim size distribution are influenced by an exogenous stochastic factor. We assume that the insurer’s surplus is governed by...
Two insurance companies
We explore the Monte Carlo steps required to reduce the sampling error of the estimated 99.9% quantile within an acceptable threshold. Our research is of primary interest to practitioners working in the area of operational risk measurement, where the...
Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, ther...
Contingent Convertible (CoCo) is a hybrid debt issued by banks with a specific feature forcing its conversion to equity in the event of the bank’s financial distress. CoCo carries two major risks: the risk of default, which threatens any type o...
In this paper, we develop a framework for measuring, allocating and managing systemic risk. SystRisk, our measure of total systemic risk, captures the a priori cost to society for providing tail-risk insurance to the financial system. Our allocation...
While the main conceptual issue related to deposit insurances is the moral hazard risk, the main technical issue is inaccurate calibration of the implied volatility. This issue can raise the risk of generating an arbitrage. In this paper, first, we d...
Banks in India have been gone through structural changes in the last three decades. The prices that bank charge depend on the competitive levels in the banking sector and the risk the assets and liabilities carry in banks’ balance sheet. The tr...
Territory design and analysis using geographical loss cost are a key aspect in auto insurance rate regulation. The major objective of this work is to study the design of geographical rating territories by maximizing the within-group homogeneity, as w...
The presented research discusses general approaches to analyze and model healthcare data at the treatment level and at the store level. The paper consists of two parts: (1) a general analysis method for store-level product sales of an organization an...
Annuities providers become more and more exposed to longevity risk due to the increase in life expectancy. To hedge this risk, new longevity derivatives have been proposed (longevity bonds, q-forwards, S-swaps…). Although academic researchers,...
A recently introduced accounting standard, namely the International Financial Reporting Standard 9, requires banks to build provisions based on forward-looking expected loss models. When there is a significant increase in credit risk of a loan, addit...
As decarbonisation progresses and conventional thermal generation gradually gives way to other technologies including intermittent renewables, there is an increasing requirement for system balancing from new and also fast-acting sources such as batte...
The aim of this paper is to construct prospective life tables adapted to the experience of Algerian retirees. Mortality data of the retired population are only available for the ages from 50 to 95 years and older and for the period from 2004 to 2013....
We provide ready-to-use formulas for European options prices, risk sensitivities, and P&L calculations under Lévy-stable models with maximal negative asymmetry. Particular cases, efficiency testing, and some qualitative features of the mod...
A statistical inference for ruin probability from a certain discrete sample of the surplus is discussed under a spectrally negative Lévy insurance risk. We consider the Laguerre series expansion of ruin probability, and provide an estimator fo...
In small populations, mortality rates are characterized by a great volatility, the datasets are often available for a few years and suffer from missing data. Therefore, standard mortality models may produce high uncertain and biologically improbable...
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