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Risk contribution and its application in asset and risk management for life insurance
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
2016 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Riskbidrag och dess användning i kapital- och riskförvaltning för livförsäkringsbolag (Swedish)
Abstract [en]

In risk management one important aspect is the allocation of total portfolio risk into its components. This can be done by measuring each components' risk contribution relative to the total risk, taking into account the covariance between components. The measurement procedure is straightforward under assumptions of elliptical distributions but not under the commonly used multivariate log-normal distributions. Two portfolio strategies are considered, the "buy and hold" and the "constant mix" strategy. The profits and losses of the components of a generic portfolio strategy are defined in order to enable a proper definition of risk contribution for the constant mix strategy. Then kernel estimation of risk contribution is performed for both portfolio strategies using Monte Carlo simulation. Further, applications for asset and risk management with risk contributions are discussed in the context of life insurance.

Abstract [sv]

En viktig aspekt inom riskhantering är tilldelning av total portföljrisk till tillångsportföljens beståndsdelar. Detta kan åstadkommas genom att mäta riskbidrag, som även kan ta hänsyn till beroenden mellan risktillgångar. Beräkning av riskbidrag är enkel vid antagande om elliptiska fördelningar så som multivariat normalfördelning, men inte vid antagande om multivariat log-normalfördelning där analytiska formler saknas. Skillnaden mellan riskbidragen inom två portföljstrategier undersöks. Dessa strategier är "buy and hold" och "constant mix" (konstant ombalansering). Tilldelning av resultaten hos de olika beståndsdelarna med en generisk portföljstrategi härleds för att kunna definiera riskbidrag för "constant mix" portföljstrategin. "Kernel estimering" används för att estimera riskbidrag genom simulering. Vidare diskuteras applikationer för tillgångs- och riskhantering inom ramen för livförsäkringsbolag.

Place, publisher, year, edition, pages
2016.
Series
TRITA-MAT-E, 2016:37
Keyword [en]
Risk contribution, capital allocation, Value-at-Risk, elliptical distri-bution, multivariate log-normal distribution, kernel estimation
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:kth:diva-188873OAI: oai:DiVA.org:kth-188873DiVA: diva2:941345
External cooperation
Skandia Liv
Subject / course
Mathematical Statistics
Educational program
Master of Science - Industrial Engineering and Management
Supervisors
Examiners
Available from: 2016-06-22 Created: 2016-06-20 Last updated: 2016-06-22Bibliographically approved

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