Insurance valuation: A computable multi-period cost-of-capital approach

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• 作者：Hampus Engsner ^{hampus.engsner@math.su.se} ; Mathias Lindholm ^{lindholm@math.su.se} ; Filip Lindskog ; ^{lindskog@math.su.se}
• 关键词：G22 ; G11 ; G28
• 刊名：Insurance: Mathematics and Economics
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：72
• 期：Complete
• 页码：250-264
• 全文大小：817 K
• 卷排序：72

文摘

We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is fixed. Then the residual cash flow is managed by repeated one-period replication using only cash funds. The latter part takes capital requirements and costs into account, as well as limited liability and risk averseness of capital providers. The cost-of-capital margin is the value of the residual cash flow. We set up a general framework for the cost-of-capital margin and relate it to dynamic risk measurement. Moreover, we present explicit formulas and properties of the cost-of-capital margin under further assumptions on the model for the liability cash flow and on the conditional risk measures and utility functions. Finally, we highlight computational aspects of the cost-of-capital margin, and related quantities, in terms of an example from life insurance.