Pricing Reinsurance Contracts

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Pricing and hedging insurance contracts is hard to perform if we subscribeto the hypotheses of the celebrated Black and Scholes model. Incomplete marketmodels 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.
Lingua originaleEnglish
Titolo della pubblicazione ospiteStochastic Optimization Methods in Finance and Energy
Numero di pagine15
Stato di pubblicazionePublished - 2011

Serie di pubblicazioni


All Science Journal Classification (ASJC) codes

  • Software
  • Computer Science Applications
  • Strategy and Management
  • Management Science and Operations Research
  • Applied Mathematics

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