Interplay of insurance and financial risks in a stochastic environment

Qihe Tang and Yang Yang

Scandinavian Actuarial Journal, 2019, vol. 2019, issue 5, 432-451

Abstract: Consider an insurer who makes risky investments and hence faces both insurance and financial risks. The insurance business is described by a discrete-time risk model modulated by a stochastic environment that poses systemic and systematic impacts on both the insurance and financial markets. This paper endeavors to quantitatively understand the interplay of the two risks in causing ruin of the insurer. Under the bivariate regular variation framework, we obtain an asymptotic formula to describe the impacts on the insurer's solvency of the two risks and of the stochastic environment.

Date: 2019
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DOI: 10.1080/03461238.2019.1573753

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