A simple model of financial grey rhino under insurer capital regulation

Fu-Wei Huang

Applied Economics, 2020, vol. 52, issue 46, 5088-5097

Abstract: This paper develops a contingent claim model to examine how capital regulation affects an insurer’s optimal guaranteed rate and survival probability when the investment-oriented/life insurance policy-oriented financial grey rhino is complemented. The investment-oriented grey rhino effect increases the policies at an increased guaranteed rate (and thus a decreased interest margin) and further decreases the insurer’s survival probability. The policy-oriented grey rhino effect decreases the guaranteed rate and further decreases the survival probability. Stringent capital regulation enhances both the guaranteed rate and the insurer’s survival, thereby contributing to insurance stability. Both the enhanced effects become more significant when either the increased investment-oriented or policy-oriented financial grey rhino effect is considered, in particular, in a down-and-out call option framework model.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2020.1752905 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:52:y:2020:i:46:p:5088-5097

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2020.1752905

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().