Benchmarked Risk Minimizing Hedging Strategies For Life Insurance Policies
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Benchmarked Risk Minimizing Hedging Strategies For Life Insurance Policies
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Author : Jin Sun
language : en
Publisher:
Release Date : 2019
Benchmarked Risk Minimizing Hedging Strategies For Life Insurance Policies written by Jin Sun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Traditional life insurance policies offer no equity investment opportunities for the premium paid, and suffer from low returns over the long insurance terms. Modern equity-linked insurance policies offer equity investment opportunities exposed to equity market risk. To combine the low-risk of traditional policies with the high returns offered by equity-linked policies, we consider insurance policies under the benchmark approach (BA), where the policyholders' funds are invested in the growth-optimal portfolio and the locally risk-free savings account. Under the BA, life insurance policies can be delivered at their minimal costs, lower than the classical actuarial theory predicts. Due to unhedgeable mortality risk, life insurance policies cannot be fully hedged. In this case benchmarked risk-minimization can be applied to obtain hedging strategies with minimally fluctuating pro fit and loss processes, where the fluctuations can further be reduced through diversification.
Risk Minimizing Hedging Strategies For Unit Linked Life Insurance Contracts
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Author : Thomas Møller
language : en
Publisher:
Release Date : 1997
Risk Minimizing Hedging Strategies For Unit Linked Life Insurance Contracts written by Thomas Møller and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Life insurance categories.
Equity Linked Life Insurance
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Author : Alexander Melnikov
language : en
Publisher: CRC Press
Release Date : 2017-09-07
Equity Linked Life Insurance written by Alexander Melnikov and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-09-07 with Business & Economics categories.
This book focuses on the application of the partial hedging approach from modern math finance to equity-linked life insurance contracts. It provides an accessible, up-to-date introduction to quantifying financial and insurance risks. The book also explains how to price innovative financial and insurance products from partial hedging perspectives. Each chapter presents the problem, the mathematical formulation, theoretical results, derivation details, numerical illustrations, and references to further reading.
Pricing And Hedging Of Emerging Products In Finance And Insurance
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Author : Junsen Tang
language : en
Publisher:
Release Date : 2018
Pricing And Hedging Of Emerging Products In Finance And Insurance written by Junsen Tang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Derivative securities categories.
This thesis addresses the pricing and hedging issues on the newly-developed financial and insurance products, including simplified hedges for path-dependent options, variable annuities tied with state-dependent fees, and defaultable reverse mortgage contracts. In Chapter 1, we present a method to construct a simplified alternative derivative that resembles a given highly path-dependent derivative. Path-dependent derivatives are typically difficult to hedge. Traditional dynamic delta hedging does not perform well because of the difficulty to evaluate the Greeks and the high cost of constantly rebalancing. We propose to price and hedge path-dependent derivatives by constructing simplified alternatives that preserve certain distributional properties of their terminal payoffs, and that can be hedged by semi-static replication. The method is illustrated by a geometric Asian option and by a lookback option in the Black-Scholes setting, for which explicit forms of the simplified alternatives exist. An extension to a Heston stochastic volatility model is discussed as well. In Chapter 2, we model and study the benefits of charging state-dependent fees in variable annuities tied to the market volatility. Variable annuities (VAs) and other long-term equity-linked insurance products are typically difficult to hedge in incomplete markets. A state-dependent fee structure tied to market volatility is proposed in these products to contribute to the risk sharing mechanism between policyholders and insurers and also to reduce the hedging difficulty. We provide criteria for the fair-fee determination in the context of reducing the risk related to writing the VA contract. A method of optimal static hedging as a benchmark compared to other strategies is proposed in the stochastic volatility setting. We formulate our problem with guaranteed minimum accumulation benefits (GMABs), but it is also applicable to other equity-linked insurance contracts. In Chapter 3, we propose a pricing scheme based on default risk models for Home Equity Conversion Mortgages (HECM). HECM Reverse mortgages are designed to allow elder homeowners aged 62 or over to convert the equity in their homes to regular revenues or a line of credit and to retain full ownership of their property for the whole life of the loan. Unlike a traditional mortgage, reverse mortgage loans do not need to be paid off as long as the borrowers remain in their home and pay due obligations such as home insurance and property taxes. HECM are non-recourse reverse mortgage loans insured by the Federal Housing Administration (FHA). HECM reverse mortgages confront a rising default risk in the wake of 2008, jeopardising the financial soundness of FHA's Mutual Mortgage Insurance Fund. The fairness of the HECM insurance premium has therefore been challenged. In this chapter, we initiate to price the reverse mortgage contract according to borrowers' individual credit and default risk. The proposed method achieves a closed-form valuation with mortality risk, interest rate risk, housing price risk, and default risk. The impact on fair HECM insurance premiums of these risks is then investigated. Our work demonstrates that the proposed pricing solution and the corresponding newly-designed rating system will provide HECM lenders a better payment arrangement for the risk management and also support the effectiveness of recent policy changes in the HECM program. The products described as above are designed in incomplete markets, which renders perfect hedging of these contracts impossible. The goal of Chapter 4 is to develop optimal static hedging in the context of minimizing the shortfall risk either for path-dependent options, hedging liabilities with insufficient budget, or hedging liabilities under the stochastic volatility environment. The shortfall risk is defined as the expectation of the potential loss from the imperfect hedging strategy, weighted by some loss function reflecting the hedger's risk preferences. In Chapter 4, we take examples on the Asian option and the GMAB contract in Chapter 2 and further develop the optimal static hedging for our products under the Heston-type stochastic volatility environment.
Pricing And Hedging Insurance Products In Hybrid Markets
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Author : Jan Widenmann
language : en
Publisher: Cuvillier Verlag
Release Date : 2013-12-11
Pricing And Hedging Insurance Products In Hybrid Markets written by Jan Widenmann and has been published by Cuvillier Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-12-11 with Business & Economics categories.
Diese Dissertation stellt innovative Pricing- und Hedging-Modelle für eine breite Klasse von Versicherungsprodukten vor. Eine wichtige Neuerung im Hinblick auf die existierende Literatur ist dabei das Anwenden F-doppelt stochastischer Markovketten, was die Ausarbeitung der Formeln anhand stochastischer Intensitätsprozesse ermöglicht. Für die Prämienbestimmung für Arbeitslosigkeitsversicherungsprodukte werden die Intensitätsprozesse durch mikro- und makroökonomische stochastische Kovariablenprozesse generiert, um Einflüsse und Abhängigkeitsstrukturen innerhalb von Arbeitsmärkten zu untersuchen. Als Preisregel wird die „Real-World“-Preisformel des Benchmark-Ansatzes gewählt. Für die Bestimmung optimaler Hedgingstrategien werden quadratische Hedging-Methoden auf eine breite Klasse von Versicherungsprodukten, u.a. Lebensversicherungsprodukten, angewandt. Die Lösungen werden dabei anhand der Galtchouk-Kunita-Watanabe-Zerlegung jeweiligen der Schadenprozesse bestimmt.
Seminar On Stochastic Analysis Random Fields And Applications Vii
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Author : Robert C. Dalang
language : en
Publisher: Springer Science & Business Media
Release Date : 2013-09-05
Seminar On Stochastic Analysis Random Fields And Applications Vii written by Robert C. Dalang and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-09-05 with Mathematics categories.
This volume contains refereed research or review articles presented at the 7th Seminar on Stochastic Analysis, Random Fields and Applications which took place at the Centro Stefano Franscini (Monte Verità) in Ascona , Switzerland, in May 2011. The seminar focused mainly on: - stochastic (partial) differential equations, especially with jump processes, construction of solutions and approximations - Malliavin calculus and Stein methods, and other techniques in stochastic analysis, especially chaos representations and convergence, and applications to models of interacting particle systems - stochastic methods in financial models, especially models for power markets or for risk analysis, empirical estimation and approximation, stochastic control and optimal pricing. The book will be a valuable resource for researchers in stochastic analysis and for professionals interested in stochastic methods in finance.
Risk Analysis In Finance And Insurance Second Edition
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Author : Alexander Melnikov
language : en
Publisher: CRC Press
Release Date : 2011-04-25
Risk Analysis In Finance And Insurance Second Edition written by Alexander Melnikov and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-04-25 with Mathematics categories.
Risk Analysis in Finance and Insurance, Second Edition presents an accessible yet comprehensive introduction to the main concepts and methods that transform risk management into a quantitative science. Taking into account the interdisciplinary nature of risk analysis, the author discusses many important ideas from mathematics, finance, and actuarial science in a simplified manner. He explores the interconnections among these disciplines and encourages readers toward further study of the subject. This edition continues to study risks associated with financial and insurance contracts, using an approach that estimates the value of future payments based on current financial, insurance, and other information. New to the Second Edition Expanded section on the foundations of probability and stochastic analysis Coverage of new topics, including financial markets with stochastic volatility, risk measures, risk-adjusted performance measures, and equity-linked insurance More worked examples and problems Reorganized and expanded, this updated book illustrates how to use quantitative methods of stochastic analysis in modern financial mathematics. These methods can be naturally extended and applied in actuarial science, thus leading to unified methods of risk analysis and management.
Managing Interest Rate Risk
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Author : John J. Stephens
language : en
Publisher: John Wiley & Sons
Release Date : 2002-03-12
Managing Interest Rate Risk written by John J. Stephens and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-03-12 with Business & Economics categories.
This book tackles the subject of interest rate risk, a matter of key importance to all businesses, whether borrowing, investing, saving or trading.
Risk Management Of Sovereign Assets And Liabilities
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Author : Mr.D. F. I. Folkerts-Landau
language : en
Publisher: International Monetary Fund
Release Date : 1997-12-01
Risk Management Of Sovereign Assets And Liabilities written by Mr.D. F. I. Folkerts-Landau and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-12-01 with Business & Economics categories.
In an environment of sizable and volatile capital flows and integrated international capital markets, large and unhedged net external sovereign liabilities expose countries to swings in international asset prices and to potential speculative currency attacks. The paper argues that an essential step in reducing emerging market vulnerability to such external shocks is to reform the institutional arrangements governing asset and liability management policies, so as to promote a transparent, publicly accountable, and professional incentive structure.
Macroprudential Solvency Stress Testing Of The Insurance Sector
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Author : Mr.Andreas A. Jobst
language : en
Publisher: International Monetary Fund
Release Date : 2014-07-22
Macroprudential Solvency Stress Testing Of The Insurance Sector written by Mr.Andreas A. Jobst and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-07-22 with Business & Economics categories.
Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.