Labour force participation across Europe: a cohort-based analysis

We use a cohort-based model to analyse the determinants of labour force participation in six European economies, focusing on age and cohort effects as factors explaining differences in participation behaviour across countries. Cohort effects are particularly relevant for women with those born in the late 1960s and early 1970s more likely to participate over the life-cycle. Our results suggest that cohort effects can be interpreted as evolving social norms or preferences towards participating in the labour market according to Fernandez (NBER working paper no. 13373, 2007). We find substantial variation in the estimated age and cohort effects across European countries: cohort effects can account for a substantial part of the recent increase in participation in Spain, the Netherlands and Germany, and a positive, but smaller part of in the increase in participation of the UK, Italy and France. Looking forward, positive cohort effects could help counteract the downward impact of population ageing on participation.     

Stochastic volatility and stochastic leverage

This paper proposes the new concept of stochastic leverage in stochastic volatility models. Stochastic leverage refers to a stochastic process which replaces the classical constant correlation parameter between the asset return and the stochastic volatility process. We provide a systematic treatment of stochastic leverage and propose to model the stochastic leverage effect explicitly, e.g. by means of a linear transformation of a Jacobi process. Such models are both analytically tractable and allow for a direct economic interpretation. In particular, we propose two new stochastic volatility models which allow for a stochastic leverage effect: the generalised Heston model and the generalised Barndorff-Nielsen & Shephard model. We investigate the impact of a stochastic leverage effect in the risk neutral world by focusing on implied volatilities generated by option prices derived from our new models. Furthermore, we give a detailed account on statistical properties of the new models.     

Aktienanlage für Lebensversicherer unter Solvency II

Life insurance companies are among the largest institutional investors. As part of their investment policy they are subject to special legal requirements. In particular the calculation of the solvency capital that has to be deposited for the market risk has changed under Solvency II. A widely spread thesis on this topic is that investments in equity have become unprofitable for life insurers due to solvency capital requirements – compared to previous periods of high equity ratios of temporally over 25%. Therefore insurers might have dropped their average stock quotas to below 5%.The intention of the present study is to analyze whether the capital requirements for the equity investments under Solvency II are a hurdle to achieve a reasonable profitability or – opposite to that – whether the equity investments are a suitable investment to provide an acceptable return on assets. For this purpose the solvency capital requirements of the equity investment under Solvency I considering the BaFin stress test are compared with the new solvency capital requirements under Solvency II including the symmetric adjustment factor (SA). Furthermore the diversification effects are taken into account; they are analyzed on the basis of the SFCR reports of the life insurance companies first published in 2017. As a result the risk capital requirements for equity investments under Solvency II have been reduced to more than 50% compared to prior solvency requirements and depending on the observed scenarios. Whilst Solvency I required an underlying risk capital of 31% at the end of 2017, Solvency II requires only 13.56% following the standard model and after aggregating the risk-mitigating effects in the group scenario. This effect results in a surplus of 7.2%, considering industry-standard capital costs for the underlying solvency capital and an average stock market return of 8% per annum. Consequently the equity investment is suitable to increase the profitability of the investments of German life insurance companies especially in the environment of low interest rates in the capital market for fixed income titles.     

Swimming in Cultural Flows: Conceptualising Tour Guides as Intercultural Mediators and Cosmopolitans

Tour guides have traditionally played a key role in linking tour operators, incoming agencies and tourists. More than most other people employed in the travel business, they are constantly involved in reconciling native and foreign cultures. Ideally they function as intercultural mediators; that is, as pathfinders and mentors who reveal unfamiliar destinations to their guests in a culturally sensitive manner. Caught up in a cultural flow in both their professional and personal lives, they move back and forth between divergent cultures and develop a distinctly cosmopolitan lifestyle. This article examines various aspects of the profession and cites several tour operators and tourists regarding the role of tour guides as intercultural mediators.     

Zillmerung und Rückkaufswert – ein kritischer Blick auf die rechtliche Bewertung

This article discusses the legal and economic correlation between the Zillmer-method and the surrender values in life insurance. The aim of this paper is to present the actuarial foundation as well as the economic needs in order to analyze critically in this context the discussion about the actual legal discussion with regard to consumer protection. As a first step the Zillmer-method, its functioning and the resulting economic benefits and consequences are presented. Subsequently, the surrender value and its historical development are studied to analyze the relationship between the Zillmer-method and surrender values. It also addresses the jurisprudence of the two High Courts, BGH and BVerfG, which manifests itself in recent years increasingly critical with regard to the Zillmer-method and surrender values. The paper results in the conclusion that it should be distinguished legally between the Zillmer-method and the surrender values more consequently than before since deregulation took place in 1994. In this respect the judgments cited require a critical evaluation. In a final step it is questioned whether the minimum guaranteed surrender values according to German law might be against European law.