Research Group on Risk in Finance and Insurance

Riskcenter
The research group on Risk in Insurance and Finance is attached to the Institute of Applied Economics IREA-UB

Barcelona Insurance and Risk Management Summer School 2012

SGR 2009-1328
Consolidated research group

Stephen Vanduffel (Université Libre de Bruxelles, Belgium)
Financial Bounds for Insurance Claims and Explicit Representation of cost-efficient Strategies. May, 16-18.

Abstract

Insurance claims are priced using an indifference pricing principle. In a jiont work with Carole Bernard, we first revisit the traditional economic framework and then extend it to include the presence of a complete financial market. In this context we derive lower bounds for claims’ prices, and these bounds correspond to the market prices of some explicitly known financial payoffs. In particular we show that the discounted expected value is no longer valid as a classical lower bound for insurance prices in general, and has to be corrected by a covariance term which reflects the interaction between the insurance claim and the financial market. The paper is illustrated by examples with equity-linked insurance contracts subject to financial and mortality risk.

About the speaker

Steven Vanduffel is an Associate Professor at the Vrije Universiteit Brussel (VUB). Prior to joining the VUB he was holding a position as Assistant Professor at the KULeuven (2006-2008). By training he has MSc degrees in mathematics and actuarial sciences from the KULeuven and a PhD from the University of Amsterdam (2005).
His research topics are in the field of actuarial and financial mathematics with a current emphasis on the valuation of insurance claims, the optimal design of derivatives and the modeling of stochastic dependence. He has published in actuarial and (financial) mathematics journals including Journal of Risk and Insurance, Applied Mathematical Finance, Insurance, Mathematics & Economics, Stochastic Models, Journal of Applied Probability, European Journal of Operational Research, International Journal of Theoretical and Applied Finance, Statistics & Probability Letters, Journal of Computational and Applied Mathematics, Scandinavian Actuarial Journal, Journal of Pension Economics and Finance and North American Actuarial Journal.

References

Bernard, C., Vanduffel, S. (2012). Financial Bounds for Insurance Claims. The Journal of Risk and Insurance, In Press. This paper received the SCOR-EGRIE Young Economist Best Paper Award

Course schedule

Day 1: Wednesday May 16 9-12
Day 2: Thursday May 17 9-12
Day 3: Friday May 18 9-12

	Riskcenter The research group on Risk in Insurance and Finance is attached to the Institute of Applied Economics IREA-UB
	Barcelona Insurance and Risk Management Summer School 2012
Home Riskcenter Home BIRMss 2012 SGR 2009-1328 Consolidated research group	Stephen Vanduffel (Université Libre de Bruxelles, Belgium) Financial Bounds for Insurance Claims and Explicit Representation of cost-efficient Strategies. May, 16-18. Abstract Insurance claims are priced using an indifference pricing principle. In a jiont work with Carole Bernard, we first revisit the traditional economic framework and then extend it to include the presence of a complete financial market. In this context we derive lower bounds for claims’ prices, and these bounds correspond to the market prices of some explicitly known financial payoffs. In particular we show that the discounted expected value is no longer valid as a classical lower bound for insurance prices in general, and has to be corrected by a covariance term which reflects the interaction between the insurance claim and the financial market. The paper is illustrated by examples with equity-linked insurance contracts subject to financial and mortality risk. About the speaker Steven Vanduffel is an Associate Professor at the Vrije Universiteit Brussel (VUB). Prior to joining the VUB he was holding a position as Assistant Professor at the KULeuven (2006-2008). By training he has MSc degrees in mathematics and actuarial sciences from the KULeuven and a PhD from the University of Amsterdam (2005). His research topics are in the field of actuarial and financial mathematics with a current emphasis on the valuation of insurance claims, the optimal design of derivatives and the modeling of stochastic dependence. He has published in actuarial and (financial) mathematics journals including Journal of Risk and Insurance, Applied Mathematical Finance, Insurance, Mathematics & Economics, Stochastic Models, Journal of Applied Probability, European Journal of Operational Research, International Journal of Theoretical and Applied Finance, Statistics & Probability Letters, Journal of Computational and Applied Mathematics, Scandinavian Actuarial Journal, Journal of Pension Economics and Finance and North American Actuarial Journal. References Bernard, C., Vanduffel, S. (2012). Financial Bounds for Insurance Claims. The Journal of Risk and Insurance, In Press. This paper received the SCOR-EGRIE Young Economist Best Paper Award Course schedule Day 1: Wednesday May 16 9-12 Day 2: Thursday May 17 9-12 Day 3: Friday May 18 9-12