Reduced-form models of default calibrated to expected default losses and comovements between default losses and an equity-based pricing kernel generate CDS spreads that tend to fall below historical values. In frictionless markets, resolving this credit spread puzzle requires credit-market...

With this paper we seek to contribute to the literature on pension insurance systems. The financial literature tends to focus exclusively on the US pension insurance system. This is the first major empirical study to address the German occupational pension insurance (PSVaG) plan in Germany. The...

This paper develops an empirical procedure for analyzing the impact of model misspecification and calibration errors on measures of portfolio credit risk. When applied to large simulated portfolios with realistic characteristics, this procedure reveals that violations of key assumptions of the...

This paper studies the discriminatory power and calibration quality of the structural credit risk models under the 'exogenous default boundary' approach including those proposed by Longstaff and Schwartz (1995) and Collin-Dufresne and Goldstein (2001), and 'endogenous default boundary' approach...

In this paper we derive a market value for Guaranteed Annuity Optionusing martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanillainterest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...

Interest rates are one of the main risk factors for insurance companies. Both assets and liabilities react to the movement of interest rates. Therefore, it is essential to have an adequate model of interest rates for Solvency II applications. Here, we address some of the existing issues under...

This paper tests for regulation-induced adverse selection in the Massachusetts automobile insurance market during the regulated period 1990-2005. The paper demonstrates the application of the Poterba-Finkelstein (2014) unused-observables test for adverse selection in a regulated insurance market...

Much attention has been paid to the large decreases in value of non-agency residential mortgage-backed securities (RMBS) during the financial crisis. Many observers have argued that the fall in prices was partly driven by decreased liquidity and fire sales. We investigate whether capital...

The German insurance market was liberalized in 1994 by the introduction of the "single passport" allowing European insurers to operate throughout the entire European Union. The European directive put also an end to price and insurance contract terms regulation. These measures were meant for...