Optimal Capital and Risk Transfers for Group Diversification
Year: 2007
Type: article
Abstract: Diversification is at the core of insurance and other financial business. It constitutes an important issue in the preparation of the new Solvency II framework for the regulation of European insurance undertakings. In this paper, we propose a conceptual framework for a legally enforceable capital and risk transfer which optimally accounts for the designated group diversification benefits. We also provide a consistent valuation principle which is compatible with any prior valuation method. This makes our framework fully flexible and universally applicable. A first simple numerical example illustrates the practicability of our proposal.
Source: Mathematical Finance
Authors: Damir Filipović, Michael Kupper
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2159223185