Modeling operational risk caused by demographic factors
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- Articles
- Submitted: September 9, 2015
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Published: November 7, 2015
Abstract
In this research paper, we propose a methodology to measure the financial risk in non-financial companies exposed to variables such as mortality and morbidity rates. The developed methodology includes elements from actuarial literature, financial economics and copulation theory. The methodology focuses on the measurement of the underlying risk to demographic factors and allows to simplify the information needed for its calculation. Finally, the methodology is validated by applying the financial risk measurement on a funeral insurance company.
References
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[2] A. J. McNeil, R. Frey, and P. Embrechts, Quantitative Risk Management: concepts, techniques and tools. Princeton University Press, 2005.
[3] R. D. Lee and L. R. Carter, “Modeling and Forecasting U . S . Mortality,” J. Am. Stat. Assoc., vol. 87, no. 419, pp. 659–671, 1992.
[4] J. Aburto, “Estimación de la mortalidad mexicana por el método de Lee-Carter y por el modelo aditivo doble multiplicativo propuesto por wilmoth,” Dirección de Análsis Demogr. XI Reunión Nacional de Investigación Demográfica en México, México, 2012.
[5] J. Alonso, D. Tuesta, D. Torres, and B. Villamide, “Proyecciones de tablas generacionales dinámicas y riesgo de longevidad en Chile,” Madrid, 13/12, 2013.
[6] P. F. Christoffersen, Elements of financial risk management. Elservier- Academic Press, 2012.
[7] A. Deaton and C. Paxson, “Mortality,income and income inequality over time in Britain and the United States,” in Perspectives on the Economics of Aging, Chicago: University of Chicago Press, 2004.
[8] F. W. Hollmann, T. J. Mulder, and J. E. Kallan, “Methodology and assumptions for the population projections of the United States : 1999 to 2100,” Popul. Div. U.S. Census Bur., no. 38, 2000.
[9] R. D. Lee and T. Miller, “Evaluating the performance of Lee-Carter approach to modeling and forecasting mortality,” Demography, vol. 38, no. 4, pp. 537–549, 2001.
[10] K. M. White, “Longevity advances in high-income countries 1955-96,” Popul. Dev. Rev., vol. 28, no. 1, pp. 59–76, 2002.
[11] F. Girosi and G. King, “Understanding the Lee-Carter mortality forecasting method,” Gking.Harvard.Edu, 2007.
[12] A. Sklar, “Fonctions de repartition à n dimensions et leurs marges,” Publ. l’Institut Stat. l’Université Paris, vol. VIII, pp. 229–231, 1959.
[13] K. Aas, C. Czado, A. Frigessi, and H. Bakken, “Pair-copula constructions of multiple dependence,” Insur. Math. Econ., vol. 44, no. 2, pp. 182–198, Apr. 2009.
[14] T. Bedford and R. M. Cooke, “Vines - A new graphical model for dependent random variables,” Ann. Stat., vol. 30, no. 4, pp. 1031–1068, 2002.
[15] D. Kurowicka and R. M. Cooke, “Distribution - free continuous Bayesian belief nets,” in Modern Statistical and Mathematical Methods in Reliability, vol. 10, World Scientific Publishing Company, 2005, pp. 309–323.
[16] K. Dowd, Measuring Market Risk. Chichester: John Wiley & Sons, 2005.
