Risk aggregation, dependence structure and diversification benefit

Insurance and reinsurance live and die from the diversification benefits or lack of it in their risk portfolio. The new solvency regulations allow companies to include them in their computation of risk-based capital (RBC). The question is how to really evaluate those benefits. To compute the total risk of a portfolio, it is important to establish the rules for aggregating the various risks that compose it. This can only be done through modelling of their dependence. It is a well known fact among traders in financial markets that "diversification works the worst when one needs it the most''. In other words, in times of crisis the dependence between risks increases. Experience has shown that very large loss events almost always affect multiple lines of business simultaneously. September 11, 2001, is an example of such an event: when the claims originated simultaneously from lines of business which are usually uncorrelated, such as property and life, at the same time that the assets of the company were depreciated due to the crisis on the stock markets. In this paper, we explore various methods of modelling dependence and their influence on diversification benefits. We show that the latter strongly depend on the chosen method and that rank correlation grossly overestimates diversification. This has consequences on the RBC for the whole portfolio, which is smaller than it should be when correctly accounting for tail correlation. However, the problem remains to calibrate the dependence for extreme events, which are rare by definition. We analyze and propose possible ways to get out of this dilemma and come up with reasonable estimates.Risk-Based Capital, Hierarchical Copula, Dependence, Calibration

A study of relativistic electron flux enhancements in the Earth's outer radiation belt

The relativistic electron distribution that occupies the outer radiation belt has been observed to vary significantly during intervals of disturbed solar wind conditions. Of particular interest are the order of magnitude increases in the relativistic electron flux that sometimes, but not always, follow the onset of a magnetic storm. These currently unpredictable relativistic electron flux enhancements are potentially hazardous during space missions causing radiation damage to spacecraft instrumentation and to humans. The work presented here establishes the conditions in the solar wind that lead to such flux enhancements. In addition, through the combined analysis of electron and wave data we provide essential constraints for the numerous proposed mechanisms for the acceleration of relativistic electrons in the outer radiation belt. The study uses data from the two STRV micro-satellites, which uncommonly are in the necessary orbit to provide coverage of almost the total electron population of the outer radiation belt essential for understanding the dynamics of the electron population. Data on the > 0.75 MeV energy electrons is used to investigate the relationship between the electron flux enhancements during magnetic storms and the coincident solar wind and geomagnetic conditions. Three distinct different types of electron responses arc identified, with outcomes that are shown to strongly depend on the solar wind speed and in particular the interplanetary magnetic field orientation during the magnetic storm recovery phase. A number of the electron acceleration mechanisms proposed to explain relativistic electron flux enhancements are driven by Pc5 pulsations in the magnetosphere. We thus investigate the relationship between these waves and electron response during magnetic storms. The findings point to a strong correlation between the Pc5 energy present during flux enhancement events and the size of the subsequent flux increase. However, the strength of the Pc5 power falls off quickly in the vicinity of the peak flux enhancement. In order to separate non-adiabatic processes, such as electron loss and most importantly heating, from adiabatic effects, we represent the electron data in a canonical coordinate system of the three adiabatic invariants. M, J and &phis; during two case studies. Using this method we identify an internal source of accelerated relativistic electrons and a further source of relativistic electrons at larger L supplied via substorm injections and inward radial diffusion. We also confirm the absence of either source of relativistic electrons when the IMF is northward during the recovery phase. Finally we use the results to help validate or discredit the various proposed electron acceleration mechanisms and end by identifying the mechanism that fits most convincingly with the analysis

Risk aggregation, dependence structure and diversification benefit

Insurance and reinsurance live and die from the diversification benefits or lack of it in their risk portfolio. The new solvency regulations allow companies to include them in their computation of risk-based capital (RBC). The question is how to really evaluate those benefits. To compute the total risk of a portfolio, it is important to establish the rules for aggregating the various risks that compose it. This can only be done through modelling of their dependence. It is a well known fact among traders in financial markets that "diversification works the worst when one needs it the most''. In other words, in times of crisis the dependence between risks increases. Experience has shown that very large loss events almost always affect multiple lines of business simultaneously. September 11, 2001, is an example of such an event: when the claims originated simultaneously from lines of business which are usually uncorrelated, such as property and life, at the same time that the assets of the company were depreciated due to the crisis on the stock markets. In this paper, we explore various methods of modelling dependence and their influence on diversification benefits. We show that the latter strongly depend on the chosen method and that rank correlation grossly overestimates diversification. This has consequences on the RBC for the whole portfolio, which is smaller than it should be when correctly accounting for tail correlation. However, the problem remains to calibrate the dependence for extreme events, which are rare by definition. We analyze and propose possible ways to get out of this dilemma and come up with reasonable estimates

Coming Back to Life: The Permeability of Past and Present, Mortality and Immortality, Death and Life in the Ancient Mediterranean

The lines between death and life were neither fixed nor finite to the peoples of the ancient Mediterranean. For most, death was a passageway into a new and uncertain existence. The dead were not so much extinguished as understood to be elsewhere, and many perceived the deceased to continue to exercise agency among the living. Even for those more skeptical of an afterlife, notions of coming back to life provided frameworks in which to conceptualize the on-going social, political, and cultural influence of the past. This collection of essays examines how notions of coming back to life shape practices and ideals throughout the ancient Mediterranean. All contributors focus on the common theme of coming back to life as a discursive and descriptive space in which antique peoples construct, maintain, and negotiate the porous boundaries between past and present, mortality and immortality, death and life

Predicting the Evolution of Sex on Complex Fitness Landscapes

Most population genetic theories on the evolution of sex or recombination are based on fairly restrictive assumptions about the nature of the underlying fitness landscapes. Here we use computer simulations to study the evolution of sex on fitness landscapes with different degrees of complexity and epistasis. We evaluate predictors of the evolution of sex, which are derived from the conditions established in the population genetic literature for the evolution of sex on simpler fitness landscapes. These predictors are based on quantities such as the variance of Hamming distance, mean fitness, additive genetic variance, and epistasis. We show that for complex fitness landscapes all the predictors generally perform poorly. Interestingly, while the simplest predictor, ΔVarHD, also suffers from a lack of accuracy, it turns out to be the most robust across different types of fitness landscapes. ΔVarHD is based on the change in Hamming distance variance induced by recombination and thus does not require individual fitness measurements. The presence of loci that are not under selection can, however, severely diminish predictor accuracy. Our study thus highlights the difficulty of establishing reliable criteria for the evolution of sex on complex fitness landscapes and illustrates the challenge for both theoretical and experimental research on the origin and maintenance of sexual reproduction

Differential cross section measurements for the production of a W boson in association with jets in proton–proton collisions at √s = 7 TeV

Measurements are reported of differential cross sections for the production of a W boson, which decays into a muon and a neutrino, in association with jets, as a function of several variables, including the transverse momenta (pT) and pseudorapidities of the four leading jets, the scalar sum of jet transverse momenta (HT), and the difference in azimuthal angle between the directions of each jet and the muon. The data sample of pp collisions at a centre-of-mass energy of 7 TeV was collected with the CMS detector at the LHC and corresponds to an integrated luminosity of 5.0 fb[superscript −1]. The measured cross sections are compared to predictions from Monte Carlo generators, MadGraph + pythia and sherpa, and to next-to-leading-order calculations from BlackHat + sherpa. The differential cross sections are found to be in agreement with the predictions, apart from the pT distributions of the leading jets at high pT values, the distributions of the HT at high-HT and low jet multiplicity, and the distribution of the difference in azimuthal angle between the leading jet and the muon at low values.United States. Dept. of EnergyNational Science Foundation (U.S.)Alfred P. Sloan Foundatio

Optimasi Portofolio Resiko Menggunakan Model Markowitz MVO Dikaitkan dengan Keterbatasan Manusia dalam Memprediksi Masa Depan dalam Perspektif Al-Qur`an

Risk portfolio on modern finance has become increasingly technical, requiring the use of sophisticated mathematical tools in both research and practice. Since companies cannot insure themselves completely against risk, as human incompetence in predicting the future precisely that written in Al-Quran surah Luqman verse 34, they have to manage it to yield an optimal portfolio. The objective here is to minimize the variance among all portfolios, or alternatively, to maximize expected return among all portfolios that has at least a certain expected return. Furthermore, this study focuses on optimizing risk portfolio so called Markowitz MVO (Mean-Variance Optimization). Some theoretical frameworks for analysis are arithmetic mean, geometric mean, variance, covariance, linear programming, and quadratic programming. Moreover, finding a minimum variance portfolio produces a convex quadratic programming, that is minimizing the objective function ðð¥with constraintsð ð 𥠥 ðandð´ð¥ = ð. The outcome of this research is the solution of optimal risk portofolio in some investments that could be finished smoothly using MATLAB R2007b software together with its graphic analysis

Juxtaposing BTE and ATE – on the role of the European insurance industry in funding civil litigation

One of the ways in which legal services are financed, and indeed shaped, is through private insurance arrangement. Two contrasting types of legal expenses insurance contracts (LEI) seem to dominate in Europe: before the event (BTE) and after the event (ATE) legal expenses insurance. Notwithstanding institutional differences between different legal systems, BTE and ATE insurance arrangements may be instrumental if government policy is geared towards strengthening a market-oriented system of financing access to justice for individuals and business. At the same time, emphasizing the role of a private industry as a keeper of the gates to justice raises issues of accountability and transparency, not readily reconcilable with demands of competition. Moreover, multiple actors (clients, lawyers, courts, insurers) are involved, causing behavioural dynamics which are not easily predicted or influenced. Against this background, this paper looks into BTE and ATE arrangements by analysing the particularities of BTE and ATE arrangements currently available in some European jurisdictions and by painting a picture of their respective markets and legal contexts. This allows for some reflection on the performance of BTE and ATE providers as both financiers and keepers. Two issues emerge from the analysis that are worthy of some further reflection. Firstly, there is the problematic long-term sustainability of some ATE products. Secondly, the challenges faced by policymakers that would like to nudge consumers into voluntarily taking out BTE LEI

Penilaian Kinerja Keuangan Koperasi di Kabupaten Pelalawan

This paper describe development and financial performance of cooperative in District Pelalawan among 2007 - 2008. Studies on primary and secondary cooperative in 12 sub-districts. Method in this stady use performance measuring of productivity, efficiency, growth, liquidity, and solvability of cooperative. Productivity of cooperative in Pelalawan was highly but efficiency still low. Profit and income were highly, even liquidity of cooperative very high, and solvability was good

Search for stop and higgsino production using diphoton Higgs boson decays

Results are presented of a search for a "natural" supersymmetry scenario with gauge mediated symmetry breaking. It is assumed that only the supersymmetric partners of the top-quark (stop) and the Higgs boson (higgsino) are accessible. Events are examined in which there are two photons forming a Higgs boson candidate, and at least two b-quark jets. In 19.7 inverse femtobarns of proton-proton collision data at sqrt(s) = 8 TeV, recorded in the CMS experiment, no evidence of a signal is found and lower limits at the 95% confidence level are set, excluding the stop mass below 360 to 410 GeV, depending on the higgsino mass