MODELING THE MORTALITY TREND UNDER MODERN SOLVENCY REGIMES

Stochastic modeling of mortality/longevity risks is necessary for internal models of (re)insurers under the new solvency regimes, such as Solvency II and the Swiss Solvency Test. In this paper, we propose a mortality model which fulfills all requirements imposed by these regimes. We show how the model can be calibrated and applied to the simultaneous modeling of both mortality and longevity risk for several populations. The main contribution of this paper is a stochastic trend component which explicitly models changes in the long-term mortality trend assumption over time. This allows to quantify mortality and longevity risk over the one-year time horizon prescribed by the solvency regimes without relying on nested simulations. We illustrate the practical ability of our model by calculating solvency capital requirements for some example portfolios, and we compare these capital requirements with those from the Solvency II standard formul

General equilibrium : dynamics and dimensionality of an economy

Traditional work on economic dynamics (such as, for example, growth theory and real business cycles) postulates as a starting point the existence of a set of phase variables, whose values fully characterise the economy at any point in time. Despite relying on a general equilibrium framework, such approaches do not justify this assumption in terms of the underlying theory, thereby failing to link economic dynamics with fundamental static principles. This thesis aims to suggest a remedy by introducing dynamics explicitly into Debreu's essentially static framework. This situation can be modelled in a certain well-defined sense. The suggested approach is novel to the economics literature, yet it preserves the fundamental notion of excess demand functions as the driving force behind trade, consumption and production processes. The formulated model yields a system of partial differential equations. For our purposes the most important aspect of this system is that despite its infinitedimensional phase space, we can show that conditions imposed by the economic nature of the underlying problem imply the existence of a finite-dimensional global attractor. In turn, the essential property of a finite-dimensional global attractor is the fact that it can be parameterised using a finite number of variables. These need not have been expliciljly present in the original equations, and therefore are not directly related to goods produced, consumed, and traded. In other words, it is shown that operations of free markets as postulated by Debreu imply the existence of a finite number of phase coordinates that characterise the economy at any point in time, as postulated by existing work on economic growth, business cycles, learning, etc.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

General Equilibrium: Arbitrage and Information

Adopting a non-probabilistic formulation of the Efficient Markets Hypothesis, this paper looks at its relationship to general equilibrium theory. Shannon's entropy allows us to show that arbitrage-free prices maximise the economy-wide amount of information, thereby bringing the two concepts together.arbitrage, entropy, information, efficient markets