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Pricing Risk-Adjusted Guaranty Insurance for Systematic Catastrophes

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Insurance guaranty funds compensate policyholders for losses resulting from insurance company insolvencies. This paper derives a risk-adjusted premium formula for insurance guaranty funds, when the insurance firm faces catastrophic risks which are correlated with the overall economy. In a normal situation, systematic jump risks lower the risk-adjusted premium, on the contrary to unsystematic jump risks.

Abstract

Ⅰ. Introduction

Ⅱ. The Risk-Adjusted Premiums

Ⅲ. The Effect of Systematic Catastrophes on the Premium

Ⅳ. Summary

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