Actuarial Applications and Estimation of Extended CreditRisk+

Jonas Hirz, Uwe Schmock and Pavel V. Shevchenko
Additional contact information
Jonas Hirz: BELTIOS GmbH, Lehargasse 1, Vienna 1060, Austria
Uwe Schmock: Department of Financial and Actuarial Mathematics, TU Wien, Wiedner Hauptstr. 8–10, Vienna 1040, Austria
Pavel V. Shevchenko: Department of Applied Finance and Actuarial Studies, Macquarie University, NSW 2109, Australia

Risks, 2017, vol. 5, issue 2, 1-29

Abstract: We introduce an additive stochastic mortality model which allows joint modelling and forecasting of underlying death causes. Parameter families for mortality trends can be chosen freely. As model settings become high dimensional, Markov chain Monte Carlo (MCMC) is used for parameter estimation. We then link our proposed model to an extended version of the credit risk model CreditRisk+. This allows exact risk aggregation via an efficient numerically stable Panjer recursion algorithm and provides numerous applications in credit, life insurance and annuity portfolios to derive P&L distributions. Furthermore, the model allows exact (without Monte Carlo simulation error) calculation of risk measures and their sensitivities with respect to model parameters for P&L distributions such as value-at-risk and expected shortfall. Numerous examples, including an application to partial internal models under Solvency II, using Austrian and Australian data are shown.

Keywords: stochastic mortality model; extended CreditRisk+; risk aggregation; partial internal model; mortality risk; longevity risk; Markov chain Monte Carlo (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-9091/5/2/23/pdf (application/pdf)
https://www.mdpi.com/2227-9091/5/2/23/ (text/html)

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:gam:jrisks:v:5:y:2017:i:2:p:23-:d:94636

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().