RISK‐MINIMIZATION FOR LIFE INSURANCE LIABILITIES WITH DEPENDENT MORTALITY RISK

In this paper, we study the pricing and hedging of typical life insurance liabilities for an insurance portfolio with dependent mortality risk by means of the well‐known risk‐minimization approach. As the insurance portfolio consists of individuals of different age cohorts in order to capture the cross‐generational dependency structure of the portfolio, we introduce affine models for the mortality intensities based on Gaussian random fields that deliver analytically tractable results. We also provide specific examples consistent with historical mortality data and correlation structures. Main novelties of this work are the explicit computations of risk‐minimizing strategies for life insurance liabilities written on an insurance portfolio composed of primary financial assets (a risky asset and a money market account) and a family of longevity bonds, and the simultaneous consideration of different age cohorts.     

Differential risk premiums and the UIP puzzle

We respecify the uncovered interest rate parity (UIP) conditions by inverting the market price of the risk (Sharpe ratio) formula. Our empirical model provides new insight indicating that violations to the UIP stem from the existence of a risk premium in the exchange rates and from observed market return differentials being a noisy statistic of the markets’ expected return differentials in our respecified model. Using an integrated macro‐micro structure framework for expected market return differentials improves our model fit and the validity of UIP.     

The Role of Federal and Private Student Loans in Homeownership Decisions

This paper examines the effect of student loans on the decision to become a homeowner. Analyses use the Baccalaureate and Beyond 2008:2012 (B&B) panel dataset collected by the U.S. Department of Education that surveyed a representative sample of four-year college graduates from institutions across the country. Whereas previous analyses of student loan debt rely on cumulative loan balances, the present research examines both federal and private student loan impacts separately. Private student loan data is often unavailable in major datasets, but the B&B data provide rich information on sources and amounts of debt for recent graduates. We instrument student loans using in-state tuition rates and find that for four-year college graduates, a $1,000 increase in a respondent's private student loan balance lowers the likelihood of buying a home by about 5 percentage points whereas a $1,000 increase in federal loans has no significant impact on homeownership during this time.     

COMPARING LOCAL RISKS BY ACCEPTANCE AND REJECTION

It is said that risky asset h acceptance dominates risky asset k if any decision maker who rejects the investment in h also rejects the investment in k. While in general acceptance dominance is a partial order, we show that it becomes a complete order if only infinitely short investment time horizons are considered. Two indices that induce different variants of this order are proposed, absolute acceptance dominance and relative acceptance dominance, and their properties are studied. We then show that many indices of riskiness that are compatible with the acceptance dominance order coincide with our indices in the continuous‐time setup.     

Europas künftige Rentenkluft

There is a significant variation in demographic development among European Union (EU) member states. Using the UN’s Population Prospects, we examine how different retirement ages in selected EU countries would lead to comparable relations between the working-age population and pensioners in the future. In the coming decades, it seems that the French would be able to take retirement roughly four years earlier than Germans. There is, therefore, no apparent economic justification for the suggested alignment of retirement ages in accordance with the current German regulation, as is sometimes suggested. Even the EU Commission has prioritised life expectancy in its recommendations for greater sustainability in the pension system, despite the fact that it is an insufficient indicator.     

Bewertungskriterien einer optimierten Energieversorgung regionaler Verbünde mit hohen Anteilen erneuerbarer Erzeugung

To determine an optimum economic solution for a renewable energy supply, an integral consideration of the system would be desirable. Because the difficulty of implementation increases with the number of stakeholders involved, locally optimized sub systems could accelerate the change in energy supply, albeit the global optimum might not be reached. An enhanced regional self-sufficiency could be a conceivable measure to increase public acceptance for interventions in the energy supply system. In this paper different ratios for quantification and illustration of the improvement of an optimized energy supply are defined. The effectiveness of demand side management, flexibly operated cogeneration units and energy storages are examined. The results are compared with those of a systematic throttling of producers during peak times. The calculations are performed within the Regenerative Modellregion Harz project, one of six model regions that are supported by the Federal Ministry of Economics and Technology and the Federal Ministry for Environment, Nature Conservation and Nuclear Safety within the E-Energy-initiative. The potential for increasing the internal consumption and the ratio of self-supply of the listed residual load smoothing methods can be determined. The reduction of maximum imports and exports by demand side management and flexibly operated cogeneration units prove to be comparatively small. A greater effect on the level of residual loads can be achieved by the use of storage power plants and especially power-to-gas because of the technology??s high storage capacity. A strong decrease of maximum exports can be realized by systematic reduction of production during peak times. The required grid capacities can almost be cut in half by using 99 instead of 100 percent of the power generation potentials.     

Guidelines for technical management of chemical process safety

The American Institute for Chemical Engineers formed the Center for Chemical Process Safety (CCPS) in March, 1985, shortly after the Bhopal tragedy. CCPS has published several technical guidelines and has sponsored needed research projects to fill gaps in technology. In addition, CCPS has sponsored several international symposia in the interest of providing forums for the interchange of the latest technology in the prevention of catastrophic events.