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.
Optimal insurance strategy for maximizing RDEU under various premium principles.
Study optimal reinsurance contracts to prevent moral hazard under non-concave premium principles.
The net-premium principle is considered to be the most genuine and fair premium principle in actuarial applications. However, an insurance company, applying the net-premium principle, goes bankrupt with probability one in the long run, even if the company covers its entire costs by collecting the respective fees from i…
In this paper, we consider the problem of optimal reinsurance design, when the risk is measured by a distortion risk measure and the premium is given by a distortion risk premium. First, we show how the optimal reinsurance design for the ceding company, the reinsurance company and the social planner can be formulated i…
Study models weather index insurance pricing by insurers and farmers, finding flexible pricing kernels boost profits.
The paper examines how risk reduction and insurance choices interact under convex premium principles.
Distortion (Denneberg 1990) is a well known premium calculation principle for insurance contracts. In this paper, we study sensitivity properties of distortion functionals w.r.t. the assumptions for risk aversion as well as robustness w.r.t. ambiguity of the loss distribution. Ambiguity is measured by the Wasserstein d…
New method for risk quantification using quantile processes and measure distortions.
In this paper, we study two classes of optimal reinsurance models from perspectives of both insurers and reinsurers by minimizing their convex combination where the risk is measured by a distortion risk measure and the premium is given by a distortion premium principle. Firstly, we show that how optimal reinsurance mod…
The paper analyzes worst-case distortion risk metrics and weighted entropy under partial information.
Optimal insurance minimizes ruin probability with non-decreasing functions.
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification effect on risk-sharing distortions that helps resolve the interest rate puzzle …
The paper explores optimal insurance contracts using various deviation measures.
We decompose the squared price-of-risk premium into three components: intervention-stable premium, confounding wedge, and information loss.
We show that different rates should be used for borrowing and discount rates, and that the risk-free rate should be used for discounting when assessing and comparing the cost of energy accross diffferent producers and technologies, on the example of photovoltaics. Recent quantitative models using the same rate for borr…
AI stocks hedge against AI singularity's economic impact.
This paper analyzes extreme flooding risks and proposes insurance and bond solutions.
Study of insurance market equilibria with risk-averse policyholders.
The study reveals unspanned risks in equity option risk premiums, explaining negative premiums for certain options.
The paper is motivated by a problem concerning the monotonicity of insurance premiums with respect to their loading parameter: the larger the parameter, the larger the insurance premium is expected to be. This property, usually called loading monotonicity, is satisfied by premiums that appear in the literature. The inc…
Examines US equity risk premiums amid COVID-19.
A new insurance and reinsurance pricing scheme based on realized loss.
We use the P&L on a particular class of swaps, representing variance and higher moments for log returns, as estimators in our empirical study on the S&P500 that investigates the factors determining variance and higher-moment risk premia. This class is the discretisation invariant sub-class of swaps with Neuberger's agg…
A new method calculates risk loadings in classification ratemaking without subjective parameters.
A new method to break down insurance costs into risk and uncertainty.
We present in this paper a new premium computation principle based on the use of prior information from multiple sources for computing the premium charged to a policyholder. Under this framework, based on the use of Ordered Weighted Averaging (OWA) operators, we propose alternative collective and Bayes premiums and des…
We determine the optimal amount of life insurance for a household of two wage earners. We consider the simple case of exponential utility, thereby removing wealth as a factor in buying life insurance, while retaining the relationship among life insurance, income, and the probability of dying and thus losing that income…
We consider the concept of equilibrium in economic systems from statistical mechanics viewpoint. A new method is suggested for computing the premium on this basis. The Bühlmann economic premium principle is derived as a special case of our method.
The paper analyzes insurance pricing and capital allocation in imperfect markets.
Proposes a fix for IRS calculation of Obamacare tax credits.
Derives a size premium from automated market makers in decentralized AI subnets.
Endogenous reinsurance pricing in large insurance markets
Introduces an unobservable intrinsic electricity price to link storage theory with risk premium.
We investigate, focusing on the ruin probability, an adaptation of the Cramer-Lundberg model for the surplus process of an insurance company, in which, conditionally on their intensities, the two mixed Poisson processes governing the arrival times of the premiums and of the claims respectively, are independent. Such a …
New model solves equity premium puzzle with risk aversion coefficient.
SPAC data shows premium investors get better terms, non-premium get quid pro quo deals.
We present an analytical study of an insurance company. We model the company's performance on a statistical basis and evaluate the predicted annual income of the company in terms of insurance parameters namely the premium, total number of the insured, average loss claims etc. We restrict ourselves to a single insurance…
Analyzes premium data of Indian non-life insurers, finding GEV distribution best fits Lognormal and GEV extremes.
New model solves equity premium puzzle.
Paper finds significant impact of stock market swings on equity risk premium predictability.
The study finds no evidence of stochastic arbitrage opportunities in S&P 500 index options.
Equity risk premium is a central component of every risk and return model in finance and a key input to estimate costs of equity and capital in both corporate finance and valuation. An article by Damodaran examines three broad approaches for estimating the equity risk premium. The first is survey based, it consists in …
The aim of this contribution is to derive a general matrix formula for the net period premium paid in more than one state. For this purpose we propose to combine actuarial technics with the graph optimization methodology. The obtained result is useful for example to more advanced models of dread disease insurances allo…
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…
We model the quantities appearing in Internal Revenue Service (IRS) tax guidance for calculating the health insurance premium tax credit created by the Patient Protection and Affordable Care Act, also called Obamacare. We ask the question of whether there is a procedure, computable by hand, which can calculate the appr…
Study finds carbon emissions affect stock value, but not bought emissions.
This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity, with a prefactor which is comparable to the spot rate volatility. This suggests th…
The paper models exchange rate risk premium using mean-reverting dynamics.