Understanding and Monitoring Reinsurance Counterparty Risk

Mathieu Gatumel () and Sabine Lemoyne de Forges
Additional contact information
Mathieu Gatumel: IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc
Sabine Lemoyne de Forges: X - École polytechnique - IP Paris - Institut Polytechnique de Paris

Post-Print from HAL

Abstract: We introduce a new measure of risk appetite in financial markets, based on the cross sectional behavior of excess returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the cross-sectional average of the individual probabilities for each asset to be in a "risk appetite" regime. Given the probabilistic approach that comes naturally with this Markov Switching framework, we present various tests to gauge the interest of the risk appetite measure that is presented here. Using these tests we show that our index behaves well vs. various competitors, especially in out-of-sample results. We test for the information content of various assets and find that a core of asset allocation-related assets provide the best possible choice over various competing specifications.

Keywords: Reinsurance Counterparty Risk; Solvency; Market Discipline; Regulation (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-00946934v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Bulletin Français d'Actuariat, 2013, 13 (26), pp.121-138

Downloads: (external link)
https://hal.science/hal-00946934v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00946934

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().