A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Optimizes insurance profits under regulatory constraints.
This article presents a stochastic framework to quantify the biometric risk of an insurance portfolio in solvency regimes such as Solvency II or the Swiss Solvency Test (SST). The main difficulty in this context constitutes in the proper representation of long term risks in the profit-loss distribution over a one year …
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might reduce the value policyholders attach to and premiums they are willing to pay for i…
Neural network model improves longevity risk assessment.
This article contains the first published example of a real economic balance sheet where the Solvency II ratio substantially depends on the seed selected for the random number generator (RNG) used. The theoretical background and the main quality criteria for RNGs are explained in detail. To serve as a gauge for RNGs, a…
RL-CVaR model improves insurance reserving under economic stress.
This paper introduces a Decision Tree Learner as an early warning system for classification of the non-life insurance companies according to their financial solid as strong, moderate, weak, or insolvency. In this study, we ran several experiments to show that the proposed model can achieve a good result using standard …
When assessing group solvency, an important question is to what extent intragroup transfers may be considered, as this determines to which extent diversification can be achieved. We suggest a framework to describe the families of admissible transfers that range from the free movement of capital to excluding any transac…
Study uses AI techniques to predict bank customer solvency.
Deep learning detects bid-rigging cartels with high accuracy.
The implementation of the Own Risk and Solvency Assessment is a critical issue raised by Pillar II of Solvency II framework. In particular the Overall Solvency Needs calculation left the Insurance companies to define an optimal entity-specific solvency constraint on a multi-year time horizon. In a life insurance societ…
SwISS improves scalability of Bayesian inference for large datasets.
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider surplus-invariant capital adequacy tests, i.e. tests that do not depend on the surplus of…
Solvency II Directive 2009/138/EC requires an insurance and reinsurance undertakings assessment of a Solvency Capital Requirement by means of the so-called "Standard Formula" or by means of partial or full internal models. Focusing on the first approach, the bottom-up aggregation formula proposed by the regulator permi…
In this article we consider the parameter risk in the context of internal modelling of the reserve risk under Solvency II. We discuss two opposed perspectives on parameter uncertainty and point out that standard methods of classical reserving focusing on the estimation error of claims reserves are in general not approp…
Neural networks improve life insurance solvency calculations.
This paper formalizes autodeleveraging as online learning, providing robustness results and algorithms for better performance.
Under the Solvency II regime, life insurance companies are asked to derive their solvency capital requirements from the full loss distributions over the coming year. Since the industry is currently far from being endowed with sufficient computational capacities to fully simulate these distributions, the insurers have t…
Framework for realistic insurance liability valuation.
We propose a Monte Carlo simulation method to generate stress tests by VaR scenarios under Solvency II for dependent risks on the basis of observed data. This is of particular interest for the construction of Internal Models and requirements on evaluation processes formulated in the Commission Delegated Regulation. The…
Foreign exchange markets show that currency units (= accounting or nominal price units) are variables. Technical and economic progress evidence that the consumer baskets (= purchasing power units or real price units) are also variables. In contrast, all physical measurement units are constants and either defined in the…
Analyzes how financial network dependencies can lead to multiple equilibrium outcomes and optimal bailout strategies.
We have analyzed the risks of possible development of bubbles in the Swiss residential real estate market. The data employed in this work has been collected by comparis.ch, and carefully cleaned from duplicate records through a procedure based on supervised machine learning methods. The study uses the log periodic powe…
We study the performance of the euro/Swiss franc exchange rate in the extraordinary period from September 6, 2011 and January 15, 2015 when the Swiss National Bank enforced a minimum exchange rate of 1.20 Swiss francs per euro. Based on the analogy between Brownian motion in finance and physics, the first-order effect …
Study assesses health plan risk measures for Solvency Capital Requirement.
Paper models demand and solvency for index insurance, combining traditional and measurable index-based coverage.
Modeling financial contagion through bank networks, revealing solvency correlations.
Within the Own Risk and Solvency Assessment framework, the Solvency II directive introduces the need for insurance undertakings to have efficient tools enabling the companies to assess the continuous compliance with regulatory solvency requirements. Because of the great operational complexity resulting from each comple…
The paper optimizes dividend strategies for companies with assets and liabilities under solvency constraints.
The underlying stochastic nature of the requirements for the Solvency II regulations has introduced significant challenges if the required calculations are to be performed correctly, without resorting to excessive approximations, within practical timescales. It is generally acknowledged by practising actuaries within U…
Introduces a new system for modeling bank solvency contagion with heterogeneous impacts and exposures.
The economic equities maximization criterion (MFPE) leads to the choice of financial portfolio, which maximizes the ratio of the expected value of the insurance company on the capital. This criterion is presented in the framework of a non-life insurance company and is applied within the framework of the French legislat…
The paper proves ADL mechanisms face a trilemma and optimizes them for fairness, revenue, and exchange solvency.
Optimizes pension fund management under funding risks.
This paper reports empirical evidence that a neural networks model is applicable to the statistically reliable prediction of foreign exchange rates. Time series data and technical indicators such as moving average, are fed to neural nets to capture the underlying "rules" of the movement in currency exchange rates. The …
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations. On the other hand, solvency constraints may force banks to recover lost funding…
LLE produces unwanted results without regularization, which can be prevented with regularization.
The article proposes a method to make valid insurance claim predictions without relying on specific models.
Paper proposes a copula method to generate unfavorable VaR scenarios.
New algorithm improves insurance company's asset allocation decisions.
As part of the new regulatory framework of Solvency II, introduced by the European Union, insurance companies are required to monitor their solvency by computing a key risk metric called the Solvency Capital Requirement (SCR). The official description of the SCR is not rigorous and has lead researchers to develop their…
A new method for calculating ES from VaR under Solvency II.
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC of the European Parliament and of the Council) when the market and non-market ri…
Optimizes bank capital structure under Basel III constraints, simplifying complex dynamics.
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of distortion risk measures. A serious deficiency of V@R is that firms can hide their total downside risk in corporate network…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency constraint. The company controls proportional reinsurance and dividend pay-out policy to…
Compact formulas for evaluating insurance policies' risks.
New eco-systemic prudential policies aim to finance green companies, reducing systemic financial risk.