1,720,960 research outputs found
Pricing index linked policies with basket cliquet options embedded using a copula approach
No full textIn this paper we present a model for the pricing of an index linked insurance contract with a basket cliquet option embedded.
The model moves from the seminal and widely accepted model of Brennan & Schwartz but uses a copula approach to describe the dependence between the two stochastic indexes composing the underlying basket.
The pricing is made via Monte Carlo stochastic simulation; some useful algorithms are described.
An application and a comparative static analysis are presente
Economic capital management for insurance companies using conditional value at risk and a copula approach
No full textThe loss ratio (LR) for insurance companies is defined as the ratio of incurred claims and earned premiums for a specified class of insurance (CoI). The company may estimate then its capital requirement for that particular CoI by using Value at Risk (VaR) or conditional VaR (CVaR) of the loss ratio distribution at a specified probability value. The overall objective of the company is to evaluate the aggregate capital requirement through a weighted sum of marginal capital requirements for all the classes of insurance. Nevertheless, this procedure may tend to over-estimate the aggregate capital requirement because it does not take into consideration the real dependence amongst the different classes of insurance. In other words, perfect dependence does not allow considering diversification effects. In this paper, we present a model which permits to take into consideration real correlations of the several CoIs. Thanks to copula functions, we are able to generate (by Monte Carlo simulations) correlated loss ratios with known marginal distributions. This approach is described through a numerical example that used data collected from some of the most important Italian non life insurance companies. We show then the diversification benefit thus obtained. We conclude the paper building an efficient frontier on the plane LR - CVaR; the efficient frontier may be considered a useful tool to manage the global company risk
A multivariate high-order markov model for the income estimation of a wind farm
Full text linkThe energy produced by a wind farm in a given location and its associated income depends both on the wind characteristics in that location—i.e., speed and direction—and the dynamics of the electricity spot price. Because of the evidence of cross-correlations between wind speed, direction and price series and their lagged series, we aim to assess the income of a hypothetical wind farm located in central Italy when all interactions are considered. To model these cross and auto-correlations efficiently, we apply a high-order multivariate Markov model which includes dependencies from each time series and from a certain level of past values. Besides this, we used the Raftery Mixture Transition Distribution model (MTD) to reduce the number of parameters to get a more parsimonious model. Using data from the MERRA-2 project and from the electricity market in Italy, we estimate the model parameters and validate them through a Monte Carlo simulation. The results show that the simulated income faithfully reproduces the empirical income and that the multivariate model also closely reproduces the cross-correlations between the variables. Therefore, the model can be used to predict the income generated by a wind farm
Reputational effects of operational risk events for financial institutions
No full textThis paper aims at measuring reputational effects for financial institutions by examining a firm’s stock price reaction to the announcement of particular operational loss events such as internal frauds. We conduct at this purpose an event study analysis of the impact of operational loss events on the market values of banks and insurance companies, using the OpVar database (OpData® dataset supplied by OpVantage®). This analysis concerns some publicly reported banking and insurance operational risk events affecting publicly traded US or European institutions from 2000 to 2006 that caused operational losses of at least $20 million – a total of 20 bank and insurance company events. We estimate for these institutions the cumulative abnormal return. It turns out the evidence that stock prices react negatively to announcements of operational losses due to internal frauds.
We conclude our analysis by estimating the Reputational Value at Risk at a given confidence level, which represents the economic capital needed to cover reputational losses over a specified holding period
A Multivariate High-Order Markov Model for the Income Estimation of a Wind Farm
Full text linkThe energy produced by a wind farm in a given location and its associated income depends both on the wind characteristics in that location—i.e., speed and direction—and the dynamics of the electricity spot price. Because of the evidence of cross-correlations between wind speed, direction and price series and their lagged series, we aim to assess the income of a hypothetical wind farm located in central Italy when all interactions are considered. To model these cross and auto-correlations efficiently, we apply a high-order multivariate Markov model which includes dependencies from each time series and from a certain level of past values. Besides this, we used the Raftery Mixture Transition Distribution model (MTD) to reduce the number of parameters to get a more parsimonious model. Using data from the MERRA-2 project and from the electricity market in Italy, we estimate the model parameters and validate them through a Monte Carlo simulation. The results show that the simulated income faithfully reproduces the empirical income and that the multivariate model also closely reproduces the cross-correlations between the variables. Therefore, the model can be used to predict the income generated by a wind farm
Pricing credit derivatives with a copula-based actuarial model for credit risk
No full textCredit derivatives are financial contracts whose pay-off are contingent on the creditworthiness of some counterparts. As was pointed out in some recent works (Mashal & Naldi (2002), Meneguzzo & Vecchiato (2002)), they have become in recent years the main tool for transferring and hedging credit risk. The most complicated of such instruments are the multinames ones. Indeed, these instruments are not quoted (market prices are not available). Besides, we do not posses closed forms for their pricing: we must necessarily set up a Monte Carlo simulation procedure. The key to perform this task consists in modelling correctly multiple defaults. A dependence structure using copulas methods was first set up by Li (2000). In this paper, Li considers time-until-default for each obligor and model their dependence structure through a Student t-copula. Other papers which take into account a copula dependence structure are due to Cherubini & Luciano (2002, 2004), Galiani (2003), Gregory & Laurent (2002), Li describes a default for a single obligor through the so-called survival function S(t) " Pr T # t! which represents the probability that this counterpart attains age t and is the time-until-default.
Li also assumes that the hazard rate function is constant, . This means that the survival time is exponentially distributed with constant parameter . Other features of this model are the following: credit
migrations at the end of the time horizon were not taken into account and recovery rates in default situations are assumed deterministic.
This model has been resumed by Mashal & Naldi with the intent to price particular multinames credit derivatives such as nth-to-default baskets. Their model is a hybrid of the well-known structural and reduced form approaches for modelling defaults.
After simulating a large number of multivariate times-until-default, one deduces pay-off for our derivative. Finally, the pricing is estimated using
standard risk-neutral pricing technology (by assuming complete markets and no-arbitrage hypothesis). The credit risk model for the underlying portfolio, already developed in Masala, Menzietti & Micocci (2004), follows a general credit risk framework: hazard rates are random variables whose values follow gamma distributions coherently with Credit Risk Plus (1997), Micocci (2000), Burgisser, Kurth & Wagner (2001) and Menzietti (2002); recovery rates themselves are supposed to be stochastic as in Gupton, Finger & Bathia (1997), and following a Beta distribution, moreover credit migrations are allowed. This feature becomes very important when we treat credit derivatives whose payoff depends on credit spread. The paper is structured as follows. Section 2 presents the model for default and credit migration; the section is divided in subsections facing the problems of time-until-default, the hazard rate function and the recovery rates, the credit migration and the exposure valuation, the loss distribution. Section 3 introduces some basket credit derivatives with numerical applications. Section 4 concludes
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
Variations on the Author
Full text link“Variations on the Author” discusses two of Eduardo Coutinho’s recent films (Um Dia na Vida, from 2010, and Últimas Conversas, posthumously released in 2015) and their contribution to the general question of documentary authorship. The director’s filmography is characterized by a consistent yet self-effacing form of authorial self-inscription: Coutinho often features as an interviewer that rather than express opinions propels discourses; an interviewer that is good at listening. This mode of self-inscription characterizes him as an author who is not expressive but who is nonetheless markedly present on the screen. In Um Dia na Vida, however, Coutinho is completely absent form the image, while Últimas Conversas, on the contrary, includes a confessional prologue that moves the director from the margins to the center of his films. This article examines the ways in which these works stand out in the filmography of a director who offers new insights into the notion of cinematic authorship
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