In this paper we study the pricing and hedging of a very general class of life insurance liabilities by means of the risk-minimization approach. We find the price and risk-minimizing strategy in two cases, first in the case when the financial market consists only of one risky asset, e.g. a stock, and a bank account, and second in an extended financial market, allowing for investments in two add...

where r is the risk free rate of interest, T is the time when the option expires, t is the current time, S(T) is a lognormal random variable related to the stock price S ( T ) at time T, k is the exercise price, and x + := max(x, 0). In insurance terms, ( L k) + represents the indemnity payment on a policy with a loss of L and a deductible k. The Black-Scholes price can also be regarded as the ...

This paper examines the role of the federal government in the market for terrorism reinsurance. We investigate the stock price response of affected industries to a sequence of 13 events culminating in the enactment of the Terrorism Risk Insurance Act (TRIA) of 2002. In the industries most likely to be affected by TRIA—banking, construction, insurance, real estate investment trusts, transportati...

We develop a simple robust link between deep out-of-the-money American put options on a company’s stock and a credit insurance contract on the company’s bond. We assume that the stock price stays above a barrier B before default but drops below a lower barrier A after default, thus generating a default corridor [A, B] that the stock price can never enter. Given the presence of this default corr...

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We provide best strategy for an insurance company assuming the limited capital for the hedging.

The paper deals with issues that have been found important for the treatment of financial services in Swedish price indices. In particular the definition of the unit transaction for fund and stock-brokering services with charge proportional to transaction value is crucial. Such services have more than a negligible extent in Sweden, also for consumers, and different definitions of the unit trans...

This paper examines what institutional and bank-specific factors determine bank stock price synchronicity. Using data on 37 countries from 1996-2007, we find that bank stocks are more aligned with the whole market (1) during the financial crisis; (2) in countries that have more credit provided by banks; (3) in countries that do not have explicit depository insurance; and (4) in countries that h...