On the cost-of-capital rate under incomplete market valuation

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Standard

On the cost-of-capital rate under incomplete market valuation. / Albrecher, Hansjörg; Eisele, Karl Theodor; Steffensen, Mogens; Wüthrich, Mario V.

I: Journal of Risk and Insurance, Bind 89, 2022, s. 1139–1158.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Albrecher, H, Eisele, KT, Steffensen, M & Wüthrich, MV 2022, 'On the cost-of-capital rate under incomplete market valuation', Journal of Risk and Insurance, bind 89, s. 1139–1158. https://doi.org/10.1111/jori.12406

APA

Albrecher, H., Eisele, K. T., Steffensen, M., & Wüthrich, M. V. (2022). On the cost-of-capital rate under incomplete market valuation. Journal of Risk and Insurance, 89, 1139–1158. https://doi.org/10.1111/jori.12406

Vancouver

Albrecher H, Eisele KT, Steffensen M, Wüthrich MV. On the cost-of-capital rate under incomplete market valuation. Journal of Risk and Insurance. 2022;89:1139–1158. https://doi.org/10.1111/jori.12406

Author

Albrecher, Hansjörg ; Eisele, Karl Theodor ; Steffensen, Mogens ; Wüthrich, Mario V. / On the cost-of-capital rate under incomplete market valuation. I: Journal of Risk and Insurance. 2022 ; Bind 89. s. 1139–1158.

Bibtex

@article{5065cba87241486c8ce52b58b6007adc,
title = "On the cost-of-capital rate under incomplete market valuation",
abstract = "In this paper we discuss the concept of the cost-of-capital (CoC) rate for an insurance company as an equilibrium in the economic triangle of policyholders, shareholders, and the regulator. This provides a possible rationalization and an economic foundation for a quantity that is widely used in practice but whose value is typically neither technically nor economically well justified. We show how it can be well founded in such a triangular equilibrium. Under a simple one-period model and a valuation procedure of a two-price economy for illiquid assets we provide a corresponding economic-theoretical quantification for the CoC rate. The resulting rates are illustrated by a number of concrete numerical examples.",
keywords = "cost of capital, insurance, risk margin, solvency capital requirements, valuation",
author = "Hansj{\"o}rg Albrecher and Eisele, {Karl Theodor} and Mogens Steffensen and W{\"u}thrich, {Mario V.}",
note = "Publisher Copyright: {\textcopyright} 2022 The Authors. Journal of Risk and Insurance published by Wiley Periodicals LLC on behalf of American Risk and Insurance Association.",
year = "2022",
doi = "10.1111/jori.12406",
language = "English",
volume = "89",
pages = "1139–1158",
journal = "Journal of Risk and Insurance",
issn = "0022-4367",
publisher = "Wiley-Blackwell",

}

RIS

TY - JOUR

T1 - On the cost-of-capital rate under incomplete market valuation

AU - Albrecher, Hansjörg

AU - Eisele, Karl Theodor

AU - Steffensen, Mogens

AU - Wüthrich, Mario V.

N1 - Publisher Copyright: © 2022 The Authors. Journal of Risk and Insurance published by Wiley Periodicals LLC on behalf of American Risk and Insurance Association.

PY - 2022

Y1 - 2022

N2 - In this paper we discuss the concept of the cost-of-capital (CoC) rate for an insurance company as an equilibrium in the economic triangle of policyholders, shareholders, and the regulator. This provides a possible rationalization and an economic foundation for a quantity that is widely used in practice but whose value is typically neither technically nor economically well justified. We show how it can be well founded in such a triangular equilibrium. Under a simple one-period model and a valuation procedure of a two-price economy for illiquid assets we provide a corresponding economic-theoretical quantification for the CoC rate. The resulting rates are illustrated by a number of concrete numerical examples.

AB - In this paper we discuss the concept of the cost-of-capital (CoC) rate for an insurance company as an equilibrium in the economic triangle of policyholders, shareholders, and the regulator. This provides a possible rationalization and an economic foundation for a quantity that is widely used in practice but whose value is typically neither technically nor economically well justified. We show how it can be well founded in such a triangular equilibrium. Under a simple one-period model and a valuation procedure of a two-price economy for illiquid assets we provide a corresponding economic-theoretical quantification for the CoC rate. The resulting rates are illustrated by a number of concrete numerical examples.

KW - cost of capital

KW - insurance

KW - risk margin

KW - solvency capital requirements

KW - valuation

UR - http://www.scopus.com/inward/record.url?scp=85138739082&partnerID=8YFLogxK

U2 - 10.1111/jori.12406

DO - 10.1111/jori.12406

M3 - Journal article

AN - SCOPUS:85138739082

VL - 89

SP - 1139

EP - 1158

JO - Journal of Risk and Insurance

JF - Journal of Risk and Insurance

SN - 0022-4367

ER -

ID: 322803188