An option pricing approach for measuring Solvency Capital Requirements in Insurance Industry

Mariarosaria Coppola, D’Amato, Valeria and Susanna Levantesi

Physica A: Statistical Mechanics and its Applications, 2018, vol. 509, issue C, 717-728

Abstract: Solvency capital requirements indicated by Solvency II against longevity risk involve distortions and inconsistencies caused by the invariance of the longevity shock compared to the age and time assumed by the regulatory model. To overcome the problem we introduce a temporal structure of the time mortality volatility which is included as a driver of longevity shock, by modeling a rolling window affine stochastic model.

Keywords: Solvency Capital Requirements; Longevity risk; Option pricing (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:509:y:2018:i:c:p:717-728

DOI: 10.1016/j.physa.2018.05.113

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