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.
The paper models exchange rate risk premium using mean-reverting dynamics.
New model for options pricing accounting for time-varying interest rates, volatility, and equity premium.
Study examines risk premium convergence rates in risk sharing contracts.
Paper proposes a surrogate model for efficient experience rating in large insurance portfolios.
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…
SPAC data shows premium investors get better terms, non-premium get quid pro quo deals.
We review different approaches for measuring the impact of liquidity on CDS prices. We start with reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different assumptions on how liquidity rates enter the CD…
Rate change calculations in the literature involve deterministic methods that measure the change in premium for a given policy. The definition of rate change as a statistical parameter is proposed to address the stochastic nature of the premium charged for a policy. It promotes the idea that rate change is a property o…
The risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return relative to the risk-free interest rate that is earned from an asset per one unit of risk. The purpose of this article is to determine upper and …
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…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
We derive an arbitrage free relationship between recovery swap rates, digital default swap spreads and conventional CDS spreads, and argue that the fair forward recovery rate used in recovery swaps must contain a convexity premium over the expected recovery value.
Endogenous reinsurance pricing in large insurance markets
We determine the optimal strategies for purchasing term life insurance and for investing in a risky financial market in order to maximize the probability of reaching a bequest goal while consuming from an investment account. We extend Bayraktar and Young (2015) by allowing the individual to purchase term life insurance…
Derives equations for life insurance reserves with interest rate uncertainty.
The study reveals traders' risk aversion and a new risk premium from market volumes.
When executing their orders, investors are proposed different strategies by brokers and investment banks. Most orders are executed using VWAP algorithms. Other basic execution strategies include POV (also called PVol) -- for percentage of volume --, IS -- implementation shortfall -- or Target Close. In this article ded…
Study on reinsurance decisions using mean-variance criterion with irreversible contracts.
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our valuation formula satisfies a number of desirable properties, many of which it shares w…
Study aims to measure and mitigate biases in motor insurance pricing.
In this paper, we introduce an insurance ruin model with adaptive premium rate, thereafter refered to as restructuring/refraction, in which classical ruin and bankruptcy are distinguished. In this model, the premium rate is increased as soon as the wealth process falls into the red zone and is brought back to its regul…
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.
The risk premium of a policy is the sum of the pure premium and the risk loading. In the classification ratemaking process, generalized linear models are usually used to calculate pure premiums, and various premium principles are applied to derive the risk loadings. No matter which premium principle is used, some risk …
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…
A new method to break down insurance costs into risk and uncertainty.
The paper models stochastic interest rates for life insurance using phase-type distributions.
Botswana's agricultural credit scheme is unsustainable and needs reform.
We analyze the probability of ruin for the {\it scaled} classical Cramér-Lundberg (CL) risk process and the corresponding diffusion approximation. The scaling, introduced by Iglehart \cite{I1969} to the actuarial literature, amounts to multiplying the Poisson rate $\la$ by , dividing the claim severity by $\sqrtn$, …
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…
In his stimulating article on the reasons for two puzzling observations about the behaviour of interest rates, exchange rates and the rate of inflation, Charles Engel (2016) puts forward an explanation that rests on the concept of a non-pecuniary liquidity return on assets. Albeit intriguing the analysis struggles to a…
This paper analyzes a game between insurer and reinsurer under ambiguity and risk aversion, optimizing reinsurance and investment strategies.
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.
We present a new approach for the pricing of interest rate derivatives which allows a direct computation of option premiums without deriving a (Black-Scholes type) partial differential equation and without explicitly solving the stochastic process for the underlying variable. The approach is tested by rederiving the pr…
Proposes a fix for IRS calculation of Obamacare tax credits.
The claim arrival process to an insurance company is modeled by a compound Poisson process whose intensity and/or jump size distribution changes at an unobservable time with a known distribution. It is in the insurance company's interest to detect the change time as soon as possible in order to re-evaluate a new fair v…
Derives a size premium from automated market makers in decentralized AI subnets.
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 …
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 …
New model solves equity premium puzzle with risk aversion coefficient.
Study optimal reinsurance strategies in a game between insurer and two reinsurers.
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.