Dynamics of solvency risk in life insurance liabilities

Marcus Christiansen, Matthias Albrecht Fahrenwaldt

Research output: Contribution to journalArticle

Abstract

We describe the time dynamics of the solvency level of life insurance contracts by representing the solvency level and the underlying risk sources as the solution of a forward–backward system. This leads to an additive decomposition of the total solvency level with respect to time and different risk sources. The decomposition turns out to be an intuitive tool to study risk sensitivities. We study the forward–backward system and discuss two methods to obtain explicit representations: via linear partial differential equations and via a Monte Carlo method based on Malliavin calculus.

Original languageEnglish
JournalScandinavian Actuarial Journal
Early online date20 Mar 2015
DOIs
StateE-pub ahead of print - 20 Mar 2015

Fingerprint

Insurance
Decompose
Decomposition
decomposition
Malliavin calculus
Linear partial differential equation
Monte Carlo method
Intuitive
Partial differential equations
Monte Carlo methods
liability

Keywords

  • backward stochastic differential equation
  • life insurance risk management
  • Malliavin calculus
  • solvency level

Cite this

Christiansen, Marcus; Fahrenwaldt, Matthias Albrecht / Dynamics of solvency risk in life insurance liabilities.

In: Scandinavian Actuarial Journal, 20.03.2015.

Research output: Contribution to journalArticle

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Dynamics of solvency risk in life insurance liabilities. / Christiansen, Marcus; Fahrenwaldt, Matthias Albrecht.

In: Scandinavian Actuarial Journal, 20.03.2015.

Research output: Contribution to journalArticle

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KW - life insurance risk management

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