From the Equivalence Principle to Market Consistent Valuation

Knispel, Thomas; Stahl, Gerhard; Weber, Stefan

doi:10.1365/s13291-011-0022-y

“…C. The remainder, the component that cannot be produced with existing and future financial instruments. Table 1 in Knispel et al (2011) provides examples of risks in categories A (e.g., equity, interest rates with short to medium term, etc. ), B (e.g., long-term interest rates or volatilities), and C (systematic insurance risks originating from mortality, disability, natural catastrophes etc.).…”

Section: What Makes Valuation So Difficult?mentioning

confidence: 99%

“…), B (e.g., long-term interest rates or volatilities), and C (systematic insurance risks originating from mortality, disability, natural catastrophes etc.). In addition, Knispel et al (2011) discuss "non-quantifiable risks" that are difficult or impossible to measure in a quantitative framework, such as political or operational risks.…”

Section: What Makes Valuation So Difficult?mentioning

confidence: 99%

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Asset-liability management for long-term insurance business

Albrecher

¹

,

Bauer

²

,

Embrechts

³

et al. 2018

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This is a summary of the main topics and findings from the Swiss Risk and Insurance Forum 2017. That event gathered experts from academia, insurance industry, regulatory bodies, and consulting companies to discuss past and current developments as well as future perspectives in dealing with asset-liability management for long-term insurance business. Topics include valuation, innovations in insurance products, investment, and modelling aspects.

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“…Using utility‐indifference (and duality) methods, the market‐consistency of pricing operators is automatically induced. However, an explicit formal definition of market‐consistent pricing operators has only begun to emerge recently; see Kupper, Cheridito, and Filipovic (2008), Malamud, Trubowitz, and Wüthrich (2008), Barrieu and El Karoui (2005, 2009), and Knispel, Stahl, and Weber (2011).…”

Section: Introductionmentioning

confidence: 99%

Time‐consistent and Market‐consistent Evaluations

Pelsser

¹

,

Stadje

²

2013

Mathematical Finance

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We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically involves combining actuarial techniques with methods from mathematical finance. We propose to extend standard actuarial principles by a new market‐consistent evaluation procedure which we call “two‐step market evaluation.” This procedure preserves the structure of standard evaluation techniques and has many other appealing properties. We give a complete axiomatic characterization for two‐step market evaluations. We show further that in a dynamic setting with continuous stock prices every evaluation which is time‐consistent and market‐consistent is a two‐step market evaluation. We also give characterization results and examples in terms of g‐expectations in a Brownian‐Poisson setting.

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“…However, an explicit formal definition of market-consistent pricing operators has only begun to emerge recently; see Kupper et al (2008), Malamud et al (2008), El Karoui (2005, 2009), and Knispel et al (2011).…”

Section: Introductionmentioning

confidence: 99%

Time-Consistent and Market-Consistent Evaluations

Stadje

¹

,

Pelsser

²

2011

SSRN Journal

0

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We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically involves combining actuarial techniques with methods from mathematical finance. We propose to extend standard actuarial principles by a new market-consistent evaluation procedure which we call 'two step market evaluation.' This procedure preserves the structure of standard evaluation techniques and has many other appealing properties. We give a complete axiomatic characterization for two step market evaluations. We show further that in a dynamic setting with continuous stock prices every evaluation which is time-consistent and market-consistent is a two step market evaluation. We also give characterization results and examples in terms of g-expectations in a Brownian-Poisson setting.Keywords: Actuarial valuation principles, financial risk, market-consistency, time-consistency. * The authors would like to thank Damir Filipovic, the participants of the AFMath2010 conference, the DGVFM 2010 Scientific Day, and seminar participants at the Institut Henri Poincaré for useful comments and suggestions on an earlier version of this paper. We also want to thank the referee for constructive suggestions which led to several improvements of the paper.

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From the Equivalence Principle to Market Consistent Valuation

Cited by 11 publications

References 32 publications

Asset-liability management for long-term insurance business

Asset-liability management for long-term insurance business

Time‐consistent and Market‐consistent Evaluations

Time-Consistent and Market-Consistent Evaluations

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