Actuarial Applications and Estimation of Extended~CreditRisk$^+$

Jonas Hirz, Uwe Schmock and Pavel V. Shevchenko

Papers from arXiv.org

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.

Date: 2015-05, Revised 2017-04
New Economics Papers: this item is included in nep-age and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1505.04757

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