Pub Date : 2022-01-01Epub Date: 2021-08-24DOI: 10.1007/s13385-021-00292-z
Sascha Desmettre, Markus Wahl, Rudi Zagst
The increasing importance of liability-driven investment strategies and the shift towards retirement products with lower guarantees and more performance participation provide challenges for the development of portfolio optimization frameworks which cover these aspects. To this end, we establish a general and flexible terminal surplus optimization framework in continuous time, allowing for dynamic investment strategies and stochastic liabilities, which can be linked to the performance of an index or the asset portfolio of the insurance company. Besides optimality results in a fairly general surplus optimization setting, we obtain closed-form solutions for the optimal investment strategy for various specific liability models, which include the cases of index-linked and performance-linked liabilities and liabilities which are completely or only partially hedgeable. We compare the results in numerical examples and study the impact of the performance participation, unhedgeable risk components, different ways of modeling the liabilities and the relative risk aversion parameter. We find that performance- or index-linked liabilities, which provide a close link between the wealth of the insurance company and its liabilities, allow for a higher allocation in the risky investment. On the other hand, unhedgeable risks reduce the allocation in the risky investment. We conclude that, aiming at a high expected return for the policy holder, insurance companies should try to connect the performance of insurance products closely to the wealth and minimize unhedgeable risks.
{"title":"Dynamic surplus optimization with performance- and index-linked liabilities.","authors":"Sascha Desmettre, Markus Wahl, Rudi Zagst","doi":"10.1007/s13385-021-00292-z","DOIUrl":"https://doi.org/10.1007/s13385-021-00292-z","url":null,"abstract":"<p><p>The increasing importance of liability-driven investment strategies and the shift towards retirement products with lower guarantees and more performance participation provide challenges for the development of portfolio optimization frameworks which cover these aspects. To this end, we establish a general and flexible terminal surplus optimization framework in continuous time, allowing for dynamic investment strategies and stochastic liabilities, which can be linked to the performance of an index or the asset portfolio of the insurance company. Besides optimality results in a fairly general surplus optimization setting, we obtain closed-form solutions for the optimal investment strategy for various specific liability models, which include the cases of index-linked and performance-linked liabilities and liabilities which are completely or only partially hedgeable. We compare the results in numerical examples and study the impact of the performance participation, unhedgeable risk components, different ways of modeling the liabilities and the relative risk aversion parameter. We find that performance- or index-linked liabilities, which provide a close link between the wealth of the insurance company and its liabilities, allow for a higher allocation in the risky investment. On the other hand, unhedgeable risks reduce the allocation in the risky investment. We conclude that, aiming at a high expected return for the policy holder, insurance companies should try to connect the performance of insurance products closely to the wealth and minimize unhedgeable risks.</p>","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s13385-021-00292-z","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"40710905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-10DOI: 10.1007/s13385-021-00296-9
M. Mesfioui, J. Trufin
{"title":"Best upper and lower bounds on Spearman’s rho for zero-inflated continuous variables and their application to insurance","authors":"M. Mesfioui, J. Trufin","doi":"10.1007/s13385-021-00296-9","DOIUrl":"https://doi.org/10.1007/s13385-021-00296-9","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47522967","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-30DOI: 10.1007/s13385-021-00299-6
A. Chen, Manuel Rach
{"title":"Correction to: Current developments in German pension schemes: What are the benefits of the new target pension?","authors":"A. Chen, Manuel Rach","doi":"10.1007/s13385-021-00299-6","DOIUrl":"https://doi.org/10.1007/s13385-021-00299-6","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42499859","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-13DOI: 10.1007/s13385-021-00297-8
Pascal Winter, F. Planchet
{"title":"Modern tontines as a pension solution: a practical overview","authors":"Pascal Winter, F. Planchet","doi":"10.1007/s13385-021-00297-8","DOIUrl":"https://doi.org/10.1007/s13385-021-00297-8","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48425362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-08-29DOI: 10.1007/s13385-021-00294-x
S. Manski, Kaixu Yang, Gee Y. Lee, T. Maiti
{"title":"Loss amount prediction from textual data using a double GLM with shrinkage and selection","authors":"S. Manski, Kaixu Yang, Gee Y. Lee, T. Maiti","doi":"10.1007/s13385-021-00294-x","DOIUrl":"https://doi.org/10.1007/s13385-021-00294-x","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45780555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-06-18DOI: 10.1007/s13385-021-00287-w
Petar Jevtic, Minsuk Kwak, T. Pirvu
{"title":"Practical partial equilibrium framework for pricing of mortality-linked instruments in continuous time","authors":"Petar Jevtic, Minsuk Kwak, T. Pirvu","doi":"10.1007/s13385-021-00287-w","DOIUrl":"https://doi.org/10.1007/s13385-021-00287-w","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s13385-021-00287-w","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42400985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-06-06DOI: 10.1007/s13385-021-00285-y
Anselm Fleischmann, Jonas Hirz, Daniela Sirianni
{"title":"A long-term care multi-state Markov model revisited: a Markov chain Monte Carlo approach","authors":"Anselm Fleischmann, Jonas Hirz, Daniela Sirianni","doi":"10.1007/s13385-021-00285-y","DOIUrl":"https://doi.org/10.1007/s13385-021-00285-y","url":null,"abstract":"","PeriodicalId":44305,"journal":{"name":"European Actuarial Journal","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2021-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s13385-021-00285-y","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48037906","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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