Extended reduced-form framework for non-life insurance

Biagini, Francesca and Zhang, Yinglin (2022): Extended reduced-form framework for non-life insurance. In: Advances in Applied Probability, Vol. 54, No. 3: pp. 945-973

Abstract

In this paper we propose a general framework for modeling an insurance liability cash flow in continuous time, by generalizing the reduced-form framework for credit risk and life insurance. In particular, we assume a nontrivial dependence structure between the reference filtration and the insurance internal filtration. We apply these results for pricing and hedging non-life insurance liabilities in hybrid financial and insurance markets, while taking into account the role of inflation under the benchmarked risk-minimization approach. This framework offers at the same time a general and flexible structure, and an explicit and treatable pricing-hedging formula.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0001-8678
• Language: English