(Re)insurance companies need to model their liabilities' portfolio to compute the risk-adjusted capital (RAC) needed to support their business. The RAC depends on both the distribution and the dependence functions that are applied among the risks in a portfolio. We investigate the impact of...

We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of 'fixed-sum' insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various...

Today’s reinsurance manager has to balance many diverging interests. Most prominent among these are the risk-return objectives of the company owners and the security requirements of the policyholders. Performance measurement issues and the sheer number of available reinsurance and capital...

Hedge funds are said to be rewarding investments because they have favourable risk-return characteristics on a standalone basis, and because they offer valuable diversification with respect to traditional stock and bond markets. On the other hand, hedge fund returns have a number of...

We briefly introduce some basic facts about multivariate extreme value theory and present some new results regarding finite aggregates and multivariate extreme value distributions. Based on our results high frequency data can considerably improve quality of estimates of extreme movements in...

The changing business environment in non-life insurance and reinsurance has raised the need for new quantitative methods to analyze the impact of various types of strategic decisions on a company’s bottom line. Dynamic Financial Analysis («DFA») has become popular among practitioners as a...

We develop a framework to assess the statistical significance of expected default frequency as calculated by credit risk models. This framework is then used to analyze the quality of two commercially available models that have become popular among practitioners: KMV Credit Monitor and RiskCalc...

Foreign exchange rates can be subject to considerable daily fluctuations (up to 5 percent within one day). This can, in certain cases, cause serious losses on open overnight positions. Given a maximum tolerable loss for a company, limits have to be set on open overnight positions in foreign...