A Conditional Value–at–Risk Model for Insurance Products with Guarantee

Antonio Pecorella; Andrea Consiglio; Stavros A. Zenios

A Conditional Value–at–Risk Model for Insurance Products with Guarantee

Antonio Pecorella, Andrea Consiglio, Stavros A. Zenios

Scienze Economiche, Aziendali e Statistiche

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

We propose a model to select the optimal portfolio whichunderlies insurance policies with a guarantee. The objective function isdefined in order to minimise the conditional value-at-risk (CVaR) of thedistribution of the losses with respect to a target return. We add operationaland regulatory constraints to make the model as flexible as possible whenused for real applications. We show that the integration of the asset andliability side yields superior performances with respect to naive fixed-mixportfolios and asset based strategies.We validate the model on out-of-samplescenarios and provide insights on policy design.

Original language	English
Pages (from-to)	122-137
Number of pages	200
Journal	International Journal of Risk Assessment and Management
Volume	11
Publication status	Published - 2009

All Science Journal Classification (ASJC) codes

Business and International Management
Statistics, Probability and Uncertainty
Management Science and Operations Research

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title = "A Conditional Value–at–Risk Model for Insurance Products with Guarantee",

abstract = "We propose a model to select the optimal portfolio whichunderlies insurance policies with a guarantee. The objective function isdefined in order to minimise the conditional value-at-risk (CVaR) of thedistribution of the losses with respect to a target return. We add operationaland regulatory constraints to make the model as flexible as possible whenused for real applications. We show that the integration of the asset andliability side yields superior performances with respect to naive fixed-mixportfolios and asset based strategies.We validate the model on out-of-samplescenarios and provide insights on policy design.",

keywords = "Asset-liability management, CVaR, Conditional value-at-risk, Policies with a minimum guarantee, Portfolio selection., Asset-liability management, CVaR, Conditional value-at-risk, Policies with a minimum guarantee, Portfolio selection.",

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year = "2009",

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AU - Pecorella, Antonio

AU - Consiglio, Andrea

AU - Zenios, Stavros A.

PY - 2009

Y1 - 2009

N2 - We propose a model to select the optimal portfolio whichunderlies insurance policies with a guarantee. The objective function isdefined in order to minimise the conditional value-at-risk (CVaR) of thedistribution of the losses with respect to a target return. We add operationaland regulatory constraints to make the model as flexible as possible whenused for real applications. We show that the integration of the asset andliability side yields superior performances with respect to naive fixed-mixportfolios and asset based strategies.We validate the model on out-of-samplescenarios and provide insights on policy design.

AB - We propose a model to select the optimal portfolio whichunderlies insurance policies with a guarantee. The objective function isdefined in order to minimise the conditional value-at-risk (CVaR) of thedistribution of the losses with respect to a target return. We add operationaland regulatory constraints to make the model as flexible as possible whenused for real applications. We show that the integration of the asset andliability side yields superior performances with respect to naive fixed-mixportfolios and asset based strategies.We validate the model on out-of-samplescenarios and provide insights on policy design.

KW - Asset-liability management

KW - CVaR

KW - Conditional value-at-risk

KW - Policies with a minimum guarantee

KW - Portfolio selection.

KW - Asset-liability management

KW - CVaR

KW - Conditional value-at-risk

KW - Policies with a minimum guarantee

KW - Portfolio selection.

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EP - 137

JO - International Journal of Risk Assessment and Management

JF - International Journal of Risk Assessment and Management

SN - 1466-8297

ER -