2021
DOI: 10.1017/asb.2021.31
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Insurance Valuation: A Two-Step Generalised Regression Approach

Abstract: Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the preferences represented by the regulatory risk measure are not reflected in the hedging process. We address this issue by an alternative two-step hedging procedure, based on generalised regression arguments, which leads to portfolios that are neutral with respect to a risk measure… Show more

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Cited by 7 publications
(6 citation statements)
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“…It is straightforward to see that the valuation introduced in Example 2 is a 3-step hedge-based valuation. Below, we show that the quantile hedging valuation of Barigou et al (2021) is also an example of a 3-step hedge-based valuation.…”
Section: Definition 43 (3-step Hedge-based Valuation)mentioning
confidence: 91%
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“…It is straightforward to see that the valuation introduced in Example 2 is a 3-step hedge-based valuation. Below, we show that the quantile hedging valuation of Barigou et al (2021) is also an example of a 3-step hedge-based valuation.…”
Section: Definition 43 (3-step Hedge-based Valuation)mentioning
confidence: 91%
“…Example 3 (The quantile hedging valuation of Barigou et al (2021)). In Barigou et al (2021), the authors start from the hedge-based valuation, but propose to use a quantile hedging approach for the residual part of the claim. Assume that i ∈ (0, 1) is the cost-of-capital rate.…”
Section: Definition Of the 3-step Hedge-based Valuationmentioning
confidence: 99%
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