Annlisis del Riesgo de Acciones en Solvencia II: Efecto Divergente del Mecanismo de Ajuste Simmtrico sobre el Valor en Riesgo (Analysis of the Equity Risk Under Solvency II: Divergent Effect of the Symmetric Adjustment Mechanism on Value at Risk)

2017 ◽  
Author(s):  
Javier Pla-Porcel
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Solvency Ii ◽  
Adjustment Mechanism ◽  
Equity Risk

A simple isochore model evidencing regulation risk

2018 ◽  
Vol 12 (2) ◽  
pp. 233-248 ◽  
Author(s):  
J. Lévy Véhel
Keyword(s):  
At Risk ◽  
Systemic Risk ◽  
Value At Risk ◽  
Solvency Ii ◽  
Basel Ii ◽  
Minimal Volume ◽  
Model Based

AbstractIn this note, we provide a simple example of regulation risk. The idea is that, in certain situations, the very prudential rules (or, rather, some of them) imposed by the regulator in the framework of the Basel II/III Accords or Solvency II directive are themselves the source of a systemic risk. The instance of regulation risk that we bring to light in this work can be summarised as follows: wrongly assuming that prices evolve in a continuous fashion when they may in fact display large negative jumps, and trying to minimise Value at Risk (VaR) under a constraint of minimal volume of activity leads in effect to behaviours that will maximise VaR. Although much stylised, our analysis highlights some pitfalls of model-based regulation.

Use of Value-at-Risk (VaR) Techniques for Solvency II, Basel II and III

2013 ◽  
pp. 1-16
Author(s):  
Marine Habart-Corlosquet ◽  
Jacques Janssen ◽  
Raimondo Manca
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Solvency Ii ◽  
Basel Ii

scholarly journals Do Nonparametric Measures of Extreme Equity Risk Change the Parametric Ordinal Ranking? Evidence from Asia

Risks ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 121 ◽  
Author(s):  
Robert Powell ◽  
Duc Vo ◽  
Thach Pham
Keyword(s):  
At Risk ◽  
Standard Deviation ◽  
Value At Risk ◽  
The United States ◽  
Conditional Value At Risk ◽  
Tail Risk ◽  
Equity Risk ◽  
Extreme Risk ◽  
New Information ◽  
High Degree

There has been much discussion in the literature about how central measures of equity risk such as standard deviation fail to account for extreme tail risk of equities. Similarly, parametric measures of value at risk (VaR) may also fail to account for extreme risk as they assume a normal distribution which is often not the case in practice. Nonparametric measures of extreme risk such as nonparametric VaR and conditional value at risk (CVaR) have often been found to overcome this problem by measuring actual tail risk without applying any predetermined assumptions. However, this article argues that it is not just the actual risk of equites that is important to investor choices, but also the relative (ordinal) risk of equities compared to each other. Using an applied setting of industry portfolios in a variety of Asian countries (benchmarked to the United States), over crisis and non-crisis periods, this article finds that nonparametric measures of VaR and CVaR may provide only limited new information to investors about relative risk in the portfolios examined as there is a high degree of similarity found in relative industry risk when using nonparametric metrics as compared to central or parametric measures such as standard deviation and parametric VaR.

scholarly journals PROPERTY RISK UNDER SOLVENCY II: EFFECTS OF DIFFERENT UNSMOOTHING TECHNIQUES

2019 ◽  
Vol 25 (1) ◽  
pp. 1-19
Author(s):  
Pablo Durán Santomil ◽  
Luís Otero González ◽  
Onofre Martorell Cunill ◽  
Anna M. Gil-Lafuente
Keyword(s):  
At Risk ◽  
Standard Model ◽  
Confidence Level ◽  
Calculation Method ◽  
Value At Risk ◽  
Solvency Ii ◽  
Capital Requirements ◽  
Insurance Companies ◽  
The Standard Model ◽  
Monthly Index

Solvency II imposes risk-based capital requirements on EU insurance companies. This paper evaluates the property risk standard model proposed. The calibration was performed from the IPD UK monthly index total returns for the period between December 1986 and December 2009. In general, it is considered that returns derived from valuation-based indices are smoother than those derived from transaction-based indices. This paper contributes to the existing literature by applying various unsmoothing techniques to this index. The results show that the capital requirements, applying the same calculation method (historical value at risk at the 99.5% confidence level) as in the calibration of the standard model, are generally bigger than those proposed in the standard model of Solvency II.

A Value-at-Risk framework for longevity trend risk

2013 ◽  
Vol 19 (1) ◽  
pp. 116-139 ◽  
Author(s):  
S. J. Richards ◽  
I. D. Currie ◽  
G. P. Ritchie
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Solvency Ii ◽  
Defined Benefit ◽  
The European Union ◽  
A Value ◽  
New Information ◽  
Risk Framework ◽  
One Year ◽  
The One

AbstractLongevity risk faced by annuity portfolios and defined-benefit pension schemes is typically long-term, i.e. the risk is of an adverse trend which unfolds over a long period of time. However, there are circumstances when it is useful to know by how much expectations of future mortality rates might change over a single year. Such an approach lies at the heart of the one-year, value-at-risk view of reserves, and also for the pending Solvency II regime for insurers in the European Union. This paper describes a framework for determining how much a longevity liability might change based on new information over the course of one year. It is a general framework and can accommodate a wide choice of stochastic projection models, thus allowing the user to explore the importance of model risk. A further benefit of the framework is that it also provides a robustness test for projection models, which is useful in selecting an internal model for management purposes.

scholarly journals Revisiting Calibration of the Solvency II Standard Formula for Mortality Risk: Does the Standard Stress Scenario Provide an Adequate Approximation of Value-at-Risk?

Risks ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 58 ◽  
Author(s):  
Rokas Gylys ◽  
Jonas Šiaulys
Keyword(s):  
At Risk ◽  
Mortality Risk ◽  
Value At Risk ◽  
Relative Size ◽  
Mortality Rates ◽  
Solvency Ii ◽  
Capital Requirements ◽  
Mortality Data ◽  
Model Based ◽  
Standard Formula

The primary objective of this work is to analyze model based Value-at-Risk associated with mortality risk arising from issued term life assurance contracts and to compare the results with the capital requirements for mortality risk as determined using Solvency II Standard Formula. In particular, two approaches to calculate Value-at-Risk are analyzed: one-year VaR and run-off VaR. The calculations of Value-at-Risk are performed using stochastic mortality rates which are calibrated using the Lee-Carter model fitted using mortality data of selected European countries. Results indicate that, depending on the approach taken to calculate Value-at-Risk, the key factors driving its relative size are: sensitivity of technical provisions to the latest mortality experience, volatility of mortality rates in a country, policy term and benefit formula. Overall, we found that Solvency II Standard Formula on average delivers an adequate capital requirement, however, we also highlight particular situations where it could understate or overstate portfolio specific model based Value-at-Risk for mortality risk.

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