Optimal capital and risk transfers for group diversification

Diversification is at the core of insurance and other financial business. It constitutes an important issue in the preparation of the new Solvency II framework for the regulation of European insurance undertakings. In this paper, we propose a conceptual framework for a legally enforceable capital and risk transfer which optimally accounts for the designated group diversification benefits. We also provide a consistent valuation principle which is compatible with any prior valuation method. This makes our framework fully flexible and universally applicable. A first simple numerical example illustrates the practicability of our proposal.


Published in:
Mathematical Finance, 18, 55-76
Year:
2008
Publisher:
Wiley-Blackwell
ISSN:
0960-1627
Keywords:
Laboratories:




 Record created 2013-08-12, last modified 2018-03-17

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