Actuarial Applications and Estimation of Extended CreditRiskPlus

34 Pages Posted: 15 May 2015 Last revised: 1 May 2017

See all articles by Jonas Hirz

Jonas Hirz

Boston Consulting Group

Uwe Schmock

TU Wien

Pavel V. Shevchenko

Macquarie University - Department of Actuarial Studies and Business Analytics

Date Written: April 30, 2017

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.

Keywords: stochastic mortality model; extended CreditRisk; risk aggregation; partial internal model; mortality risk; longevity risk; Markov chain Monte Carlo

JEL Classification: C13, C15, I12, J11, G20

Suggested Citation

Hirz, Jonas and Schmock, Uwe and Shevchenko, Pavel V., Actuarial Applications and Estimation of Extended CreditRiskPlus (April 30, 2017). Available at SSRN: https://ssrn.com/abstract=2606203

Jonas Hirz (Contact Author)

Boston Consulting Group

Austria

Uwe Schmock

TU Wien ( email )

Karlsplatz 13
Vienna
Austria

Pavel V. Shevchenko

Macquarie University - Department of Actuarial Studies and Business Analytics ( email )

Australia

HOME PAGE: http://www.mq.edu.au/research/centre-for-risk-analytics/pavel-shevchenko

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
111
Abstract Views
1,160
Rank
447,613
PlumX Metrics