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Astin bulletin: The journal of the International Actuarial Association
Cambridge University Press
Astin bulletin: The journal of the International Actuarial Association

Cambridge University Press

年3期

0515-0361

Astin bulletin: The journal of the International Actuarial Association/Journal Astin bulletin: The journal of the International Actuarial AssociationSCIISSHP
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    Risk management with local least squares Monte Carlo

    Donatien HainautAdnane Akbaraly
    489-514页
    查看更多>>摘要：Abstract The least squares Monte Carlo method has become a standard approach in the insurance and financial industries for evaluating a company’s exposure to market risk. However, the non-linear regression of simulated responses on risk factors poses a challenge in this procedure. This article presents a novel approach to address this issue by employing an a-priori segmentation of responses. Using a K-means algorithm, we identify clusters of responses that are then locally regressed on their corresponding risk factors. The global regression function is obtained by combining the local models with logistic regression. We demonstrate the effectiveness of the proposed local least squares Monte Carlo method through two case studies. The first case study investigates butterfly and bull trap options within a Heston stochastic volatility model, while the second case study examines the exposure to risks in a participating life insurance scenario.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Intergenerational risk sharing in a defined contribution pension system: analysis with Bayesian optimization

    An ChenMotonobu KanagawaFangyuan Zhang
    515-544页
    查看更多>>摘要：Abstract We study a fully funded, collective defined contribution (DC) pension system with multiple overlapping generations. We investigate whether the welfare of participants can be improved by intergenerational risk sharing (IRS) implemented with a realistic investment strategy (e.g., no borrowing) and without an outside entity (e.g., shareholders) that helps finance the pension fund. To implement IRS, the pension system uses an automatic adjustment rule for the indexation of individual accounts, which adapts to the notional funding ratio of the pension system. The pension system has two parameters that determine the investment strategy and the strength of the adjustment rule, which are optimized by expected utility maximization using Bayesian optimization. The volatility of the retirement benefits and that of the funding ratio are analyzed, and it is shown that the trade-off between them can be controlled by the optimal adjustment parameter to attain IRS. Compared with the optimal individual DC benchmark using the life cycle strategy, the studied pension system with IRS is shown to improve the welfare of risk-averse participants, when the financial market is volatile.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Target benefit versus defined contribution scheme: a multi-period framework

    Ping ChenHaixiang YaoHailiang YangDan Zhu...
    545-579页
    查看更多>>摘要：Abstract A target benefit plan (TBP) is a collective defined contribution (DC) plan that is growing in popularity in Canada. Similar to DC plans, TBPs have fixed contribution rates, but they also implement pooling of longevity and investment risk. In this paper, we formulate a multi-period model that incorporates two sources of risk – asset risk and labor income risk for active members. We present an optimal investment and retirement benefits schedule for TBP members with a fixed contribution rate. Using Australian data from 1965 to 2018, we evaluate the performance of the optimal TBP scheme and compare it to the optimal DC scheme. By adopting the benefit–investment strategy derived in this paper, we demonstrate the stability of benefit distribution over time for a TBP scheme in this stochastic formulation. To outperform the DC scheme’s benefit payment, careful consideration shall be given to the benefit target in the TBP scheme. A high target may not be achievable, while a low target can impede the accumulation momentum of the fund’s wealth in its early stages. Moreover, a TBP fund’s investment strategy is primarily influenced by the wealth target, with more aggressive investments in risky assets as the wealth target increases. This analysis may shed light on the possible improvements to retirement planning in Australia. Although the results are sensitive to the choice of model parameters, overall, the proposed TBP promotes system stability in various scenarios.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    A hybrid data mining framework for variable annuity portfolio valuation

    Hyukjun GweonShu Li
    580-595页
    查看更多>>摘要：Abstract A variable annuity is a modern life insurance product that offers its policyholders participation in investment with various guarantees. To address the computational challenge of valuing large portfolios of variable annuity contracts, several data mining frameworks based on statistical learning have been proposed in the past decade. Existing methods utilize regression modeling to predict the market value of most contracts. Despite the efficiency of those methods, a regression model fitted to a small amount of data produces substantial prediction errors, and thus, it is challenging to rely on existing frameworks when highly accurate valuation results are desired or required. In this paper, we propose a novel hybrid framework that effectively chooses and assesses easy-to-predict contracts using the random forest model while leaving hard-to-predict contracts for the Monte Carlo simulation. The effectiveness of the hybrid approach is illustrated with an experimental study.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Ratemaking in a changing environment

    A. Nii-Armah Okine
    596-618页
    查看更多>>摘要：Abstract In pricing insurance contracts based on the individual policyholder’s aggregate losses for non-life insurers, the literature has mainly focused on using detailed information from policies and closed claims. However, the information on open claims can reflect shifts in the distribution of the expected claim payments better than closed claims. Such shifts may be needed to be reflected in the ratemaking process earlier rather than later, especially when insurers are experiencing environmental changes. In practice, actuaries use ad hoc techniques to adjust data to current levels to determine premiums. This paper presents an intuitive ratemaking model, employing a marked Poisson process framework, which ensures that the multivariate risk analysis is done more routinely using all reported claims and makes an adjustment for Incurred But Not Reported claims. Utilizing data from the Wisconsin Local Government Property Insurance Fund, we find that by determining rates based on current data, the proposed ratemaking model leads to better alignment of premiums and provides insurers with a more financially sound portfolio.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Estimating the VaR-induced Euler allocation rule

    N.V. GribkovaJ. SuR. Zitikis
    619-635页
    查看更多>>摘要：Abstract The prominence of the Euler allocation rule (EAR) is rooted in the fact that it is the only return on risk-adjusted capital (RORAC) compatible capital allocation rule. When the total regulatory capital is set using the value-at-risk (VaR), the EAR becomes – using a statistical term – the quantile-regression (QR) function. Although the cumulative QR function (i.e., an integral of the QR function) has received considerable attention in the literature, a fully developed statistical inference theory for the QR function itself has been elusive. In the present paper, we develop such a theory based on an empirical QR estimator, for which we establish consistency, asymptotic normality, and standard error estimation. This makes the herein developed results readily applicable in practice, thus facilitating decision making within the RORAC paradigm, conditional mean risk sharing, and current regulatory frameworks.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Range-based risk measures and their applications

    Marcelo Brutti RighiFernanda Maria Müller
    636-657页
    查看更多>>摘要：Abstract We propose a family of range-based risk measures to generalize the role of value at risk (VaR) in the formulation of range value at risk (RVaR) considering other risk measures induced by a tail level. We discuss this type of measure in detail and its theoretical properties and representations. Moreover, we present a score function to evaluate the forecasts of these measures. In order to present the proposed concepts in an applied way, we performed illustrations using Monte Carlo simulations and real financial data.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Optimal commissions and subscriptions in mutual aid platforms

    Yixing ZhaoYan Zeng
    658-683页
    查看更多>>摘要：Abstract This paper investigates an operation mechanism for mutual aid platforms to develop more sustainably and profitably. A mutual aid platform is an online risk-sharing platform for risk-heterogeneous participants, and the platform extracts revenues by charging participants commission and subscription fees. A modeling framework is proposed to identify the optimal commissions and subscriptions for mutual aid platforms. Participants are divided into different types based on their loss probabilities and values derived from the platform. We present how these commissions and subscriptions should be set in a mutual aid plan to maximize the platform’s revenues. Our analysis emphasized the importance of accounting for risk heterogeneity in mutual aid platforms. Specifically, different types of participants should be charged different commissions/subscriptions depending on their loss probabilities and values on the platform. Participants’ shared costs should be determined based on their loss probabilities. Adverse selection occurs on the platform if participants with different risks pay the same shared costs. Our results also show that the platform’s maximum revenue will be lower if the platform charges the same fee to all participants. The numerical results of a practical example illustrate that the optimal commission/subscription scheme and risk-sharing rule result in considerable improvements in platform revenue over the current scheme implemented by the platform.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Cyber insurance-linked securities

    Alexander BraunMartin ElingChristoph Jaenicke
    684-705页
    查看更多>>摘要：Abstract We investigate the feasibility of cyber risk transfer through insurance-linked securities (ILS). On the investor side, we elicit the preferred characteristics of cyber ILS and the corresponding return expectations. We then estimate the cost of equity of insurers and compare it to the Rate on Line expected by investors to match demand and supply in the cyber ILS market. Our results show that cyber ILS will work for both cedents and investors if the cyber risk is sufficiently well understood. Thus, challenges related to cyber risk modeling need to be overcome before a meaningful cyber ILS market may emerge.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press

    Reinsurance games with $\boldsymbol{{n}}$ variance-premium reinsurers: from tree to chain

    Jingyi CaoDongchen LiVirginia R. YoungBin Zou...
    706-728页
    查看更多>>摘要：Abstract This paper studies dynamic reinsurance contracting and competition problems under model ambiguity in a reinsurance market with one primary insurer and n reinsurers, who apply the variance premium principle and who are distinguished by their levels of ambiguity aversion. The insurer negotiates reinsurance policies with all reinsurers simultaneously, which leads to a reinsurance tree structure with full competition among the reinsurers. We model the reinsurance contracting problems between the insurer and reinsurers by Stackelberg differential games and the competition among the reinsurers by a non-cooperative Nash game. We derive equilibrium strategies in semi-closed form for all the companies, whose objective is to maximize their expected surpluses penalized by a squared-error divergence term that measures their ambiguity. We find that, in equilibrium, the insurer purchases a positive amount of proportional reinsurance from each reinsurer. We further show that the insurer always prefers the tree structure to the chain structure, in which the risk of the insurer is shared sequentially among all reinsurers.
      原文链接:
    • NETL
    • NSTL
    • Cambridge Univ Press