THE ROMANIAN INSURANCE MARKET AND THE POTENTIAL EFFECTS OF THE CRISIS UPON IT

The global financial and economic crisis is felt in almost all the companies that operate on the European financial and insurance markets. The European insurance and re-insurance industry would register a significant decrease of the investments and a redulife insurance market, non-life insurances, financial-economic crisis

Generalized Logistic Models and its orthant tail dependence

The Multivariate Extreme Value distributions have shown their usefulness in environmental studies, financial and insurance mathematics. The Logistic or Gumbel-Hougaard distribution is one of the oldest multivariate extreme value models and it has been extended to asymmetric models. In this paper we introduce generalized logistic multivariate distributions. Our tools are mixtures of copulas and stable mixing variables, extending approaches in Tawn (1990), Joe and Hu (1996) and Foug\`eres et al. (2009). The parametric family of multivariate extreme value distributions considered presents a flexible dependence structure and we compute for it the multivariate tail dependence coefficients considered in Li (2009)

Facebook drives behavior of passive households in stock markets

Recent studies using data on social media and stock markets have mainly focused on predicting stock returns. Instead of predicting stock price movements, we examine the relation between Facebook data and investors' decision making in stock markets with a unique data on investors' transactions on Nokia. We find that the decisions to buy versus sell are associated with Facebook data especially for passive households and also for nonprofit organizations. At the same time, it seems that more sophisticated investors---financial and insurance institutions---are behaving independently from Facebook activities.Comment: This paper is forthcoming in Finance Research Letter

Essays in Financial and Insurance Mathematics.

This dissertation consists of the following three parts: (i) We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset. The price of the risky asset is assumed to follow a diffusion with stochastic volatility. Given the rate of consumption, we find the optimal investment strategy for the individual who wishes to minimize the probability of outliving the wealth. Techniques from stochastic optimal control are used. (ii) We extend the Heston stochastic volatility model to include state-dependent jumps in the price and the volatility, and develop a method for the exact simulation of this model. The jumps arrive with a stochastic intensity that may depend on time, price, volatility and jump counts. The jumps may have an impact on the price or the volatility, or both. The random jump size may depend on the price and volatility. The exact simulation method is based on projection and point process filtering arguments. Numerical experiments illustrate the features of the exact method. (iii) We study the properties of sovereign credit risk using Credit Default Swap (CDS) spreads for U.S. and major sovereign countries. We develop a regime-switching two-factor model that allows for both global-systemic and sovereign-specific credit shocks, and use maximum likelihood estimation to calibrate model parameters to weekly CDS data. The preliminary results suggest that there is heterogeneity across different countries with respect to their sensitivity to system risk. Furthermore, the high-volatility and low-volatility regimes behave differently with asymmetric regime-shift probabilities.Ph.D.Applied and Interdisciplinary MathematicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/91381/1/xyhu_1.pd

The Unholy Trinity: Fat Tails, Tail Dependence, and Micro-Correlations

Recent events in the financial and insurance markets, as well as the looming challenges of a globally changing climate point to the need to re-think the ways in which we measure and manage catastrophic and dependent risks. Management can only be as good as our measurement tools. To that end, this paper outlines detection, measurement, and analysis strategies for fat-tailed risks, tail dependent risks, and risks characterized by micro-correlations. A simple model of insurance demand and supply is used to illustrate the difficulties in insuring risks characterized by these phenomena. Policy implications are discussed.risk, fat tails, tail dependence, micro-correlations, insurance, natural disasters

Bayesian optimal investment and reinsurance with dependent financial and insurance risks

Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be determined it is important to consider models which reflect this dependence. In this paper we make a proposal how to generate dependence between the financial market and claim sizes in times of crisis and determine via a stochastic control approach an optimal investment and reinsurance strategy which maximizes the expected exponential utility of terminal wealth. Moreover, we also allow that the claim size distribution may be learned in the model. We give comparisons and bounds on the optimal strategy using simple models. What turns out to be very surprising is that numerical results indicate that even a minimal dependence which is created in this model has a huge impact on the control in the sense that the insurer is much more prudent then

Bayesian optimal investment and reinsurance with dependent financial and insurance risks

Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be determined it is important to consider models which reflect this dependence. In this paper we make a proposal how to generate dependence between the financial market and claim sizes in times of crisis and determine via a stochastic control approach an optimal investment and reinsurance strategy which maximizes the expected exponential utility of terminal wealth. Moreover, we also allow that the claim size distribution may be learned in the model. We give comparisons and bounds on the optimal strategy using simple models. What turns out to be very surprising is that numerical results indicate that even a minimal dependence which is created in this model has a huge impact on the control in the sense that the insurer is much more prudent then.Comment: arXiv admin note: text overlap with arXiv:2001.1130

Використання інструментів фінансового ринку як альтернативного механізму перестрахування

У статті розглядається процес формування нових видів цінних паперів як результату конвергенції та взаємозв’язку страхового і фінансового ринків. Проводиться класифікація альтернативних механізмів передачі ризиків та їх порівняльна характеристика.The article is focused on the origin of insurance-linked securities as a result of convergence and interconnection of financial and insurance markets. It also provides the classification of alternative risk transfers and their comparative description