Stress scenario generation for solvency and risk management

Research output: Contribution to journal › Journal article › Research › peer-review

Standard

Stress scenario generation for solvency and risk management. / Christiansen, Marcus Christian; Henriksen, Lars Frederik Brandt; Schomacker, Kristian Juul; Steffensen, Mogens.

In: Scandinavian Actuarial Journal, Vol. 2016, No. 6, 02.07.2016, p. 502-529.

Research output: Contribution to journal › Journal article › Research › peer-review

Harvard

Christiansen, MC, Henriksen, LFB, Schomacker, KJ & Steffensen, M 2016, 'Stress scenario generation for solvency and risk management', Scandinavian Actuarial Journal, vol. 2016, no. 6, pp. 502-529. https://doi.org/10.1080/03461238.2014.971860

APA

Christiansen, M. C., Henriksen, L. F. B., Schomacker, K. J., & Steffensen, M. (2016). Stress scenario generation for solvency and risk management. Scandinavian Actuarial Journal, 2016(6), 502-529. https://doi.org/10.1080/03461238.2014.971860

Vancouver

Christiansen MC, Henriksen LFB, Schomacker KJ, Steffensen M. Stress scenario generation for solvency and risk management. Scandinavian Actuarial Journal. 2016 Jul 2;2016(6):502-529. https://doi.org/10.1080/03461238.2014.971860

Author

Christiansen, Marcus Christian ; Henriksen, Lars Frederik Brandt ; Schomacker, Kristian Juul ; Steffensen, Mogens. / Stress scenario generation for solvency and risk management. In: Scandinavian Actuarial Journal. 2016 ; Vol. 2016, No. 6. pp. 502-529.

Bibtex

@article{03069ab9653645088bf59ac40ccd06ba,
title = "Stress scenario generation for solvency and risk management",
abstract = "We derive worst-case scenarios in a life insurance model in the case where the interest rate and the various transition intensities are mutually dependent. Examples of this dependence are that (a) surrender intensities and interest rates are high at the same time, (b) mortality intensities of a policyholder as active and disabled, respectively, are low at the same time, and (c) mortality intensities of the policyholders in a portfolio are low at the same time. The set from which the worst-case scenario is taken reflects the dependence structure and allows us to relate the worst-case scenario-based reserve, qualitatively, to a Value-at-Risk-based calculation of solvency capital requirements. This brings out perspectives for our results in relation to qualifying the standard formula of Solvency II or using a scenario-based approach in internal models. Our results are powerful for various applications and the techniques are non-standard in control theory, exactly because our worst-case scenario is deterministic and not adapted to the stochastic development of the portfolio. The formalistic results are exemplified in a series of numerical studies.",
author = "Christiansen, {Marcus Christian} and Henriksen, {Lars Frederik Brandt} and Schomacker, {Kristian Juul} and Mogens Steffensen",
year = "2016",
month = jul,
day = "2",
doi = "10.1080/03461238.2014.971860",
language = "English",
volume = "2016",
pages = "502--529",
journal = "Scandinavian Actuarial Journal",
issn = "0346-1238",
publisher = "Taylor & Francis Scandinavia",
number = "6",

}

RIS

TY - JOUR

T1 - Stress scenario generation for solvency and risk management

AU - Christiansen, Marcus Christian

AU - Henriksen, Lars Frederik Brandt

AU - Schomacker, Kristian Juul

AU - Steffensen, Mogens

PY - 2016/7/2

Y1 - 2016/7/2

N2 - We derive worst-case scenarios in a life insurance model in the case where the interest rate and the various transition intensities are mutually dependent. Examples of this dependence are that (a) surrender intensities and interest rates are high at the same time, (b) mortality intensities of a policyholder as active and disabled, respectively, are low at the same time, and (c) mortality intensities of the policyholders in a portfolio are low at the same time. The set from which the worst-case scenario is taken reflects the dependence structure and allows us to relate the worst-case scenario-based reserve, qualitatively, to a Value-at-Risk-based calculation of solvency capital requirements. This brings out perspectives for our results in relation to qualifying the standard formula of Solvency II or using a scenario-based approach in internal models. Our results are powerful for various applications and the techniques are non-standard in control theory, exactly because our worst-case scenario is deterministic and not adapted to the stochastic development of the portfolio. The formalistic results are exemplified in a series of numerical studies.

AB - We derive worst-case scenarios in a life insurance model in the case where the interest rate and the various transition intensities are mutually dependent. Examples of this dependence are that (a) surrender intensities and interest rates are high at the same time, (b) mortality intensities of a policyholder as active and disabled, respectively, are low at the same time, and (c) mortality intensities of the policyholders in a portfolio are low at the same time. The set from which the worst-case scenario is taken reflects the dependence structure and allows us to relate the worst-case scenario-based reserve, qualitatively, to a Value-at-Risk-based calculation of solvency capital requirements. This brings out perspectives for our results in relation to qualifying the standard formula of Solvency II or using a scenario-based approach in internal models. Our results are powerful for various applications and the techniques are non-standard in control theory, exactly because our worst-case scenario is deterministic and not adapted to the stochastic development of the portfolio. The formalistic results are exemplified in a series of numerical studies.

U2 - 10.1080/03461238.2014.971860

DO - 10.1080/03461238.2014.971860

M3 - Journal article

VL - 2016

SP - 502

EP - 529

JO - Scandinavian Actuarial Journal

JF - Scandinavian Actuarial Journal

SN - 0346-1238

IS - 6

ER -

ID: 130560725