Pricing and hedging insurance contracts is hard to perform if we subscribe to the hypotheses of the celebrated Black and Scholes model. Incomplete market models allow for the relaxation of hypotheses that are unrealistic for insurance and reinsurance contracts. One such assumption is the tradeability of the underlying asset. To overcome this drawback, we propose in this chapter a stochastic programming model leading to a superhedging portfolio whose final value is at least equal to the insurance final liability. A simple model extension, furthermore, is shown to be sufficient to determine an optimal reinsurance protection for the insurer: we propose a conditional value at risk (VaR) model particularly suitable for large-scale problem instances and rationale from a risk theoretic point of view.

Consiglio, A., De Giovanni, D. (2011). Pricing Reinsurance Contracts. In M. Bertocchi, G. Consigli, M. Dempster (a cura di), Stochastic Optimization Methods in Finance and Energy (pp. 125-139). New York : Springer [10.1007/978-1-4419-9586-5_6].

Pricing Reinsurance Contracts

CONSIGLIO, Andrea;
2011-01-01

Abstract

Pricing and hedging insurance contracts is hard to perform if we subscribe to the hypotheses of the celebrated Black and Scholes model. Incomplete market models allow for the relaxation of hypotheses that are unrealistic for insurance and reinsurance contracts. One such assumption is the tradeability of the underlying asset. To overcome this drawback, we propose in this chapter a stochastic programming model leading to a superhedging portfolio whose final value is at least equal to the insurance final liability. A simple model extension, furthermore, is shown to be sufficient to determine an optimal reinsurance protection for the insurer: we propose a conditional value at risk (VaR) model particularly suitable for large-scale problem instances and rationale from a risk theoretic point of view.
2011
Settore SECS-S/06 -Metodi Mat. dell'Economia e d. Scienze Attuariali e Finanz.
Consiglio, A., De Giovanni, D. (2011). Pricing Reinsurance Contracts. In M. Bertocchi, G. Consigli, M. Dempster (a cura di), Stochastic Optimization Methods in Finance and Energy (pp. 125-139). New York : Springer [10.1007/978-1-4419-9586-5_6].
File in questo prodotto:
File Dimensione Formato  
2011-Pricing Reinsurance Contracts.pdf

Solo gestori archvio

Descrizione: Articolo Principale
Dimensione 7.55 MB
Formato Adobe PDF
7.55 MB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/62308
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? ND
social impact