5th Workshop at FRIAS
| What |
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|---|---|
| When |
Jun 27, 2019 from 10:00 AM to 05:00 PM |
| Where | FRIAS, Alberstr. 9, 79104 Freiburg, Big Seminar Room |
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Invitation to our 5th workshop at FRIAS, 27th of June 2019:
| 10.00 | Welcome |
| 10.15 | Stephane Crépey: XVA analysis from the balance sheet |
| 11.15 | Anna Rita Bacinello: The impact of longevity risk and contractural heterogeneity on the fail valuation of a life insurance portfolio |
| 12.30 | Lunch at FRIAS |
| 14.00 | Mitja Stadje: On time-consistent and market-consistent evaluations |
| 15.00 | Coffee break at FRIAS lounge |
| 15.30 | Thorsten Schmidt: A fundamental theorem of insurance valuation |
| 16.30 | Stefan Tappe: Mortality-interest rate term structures |
| 17.00 | Closing discussion |
| 19.30 | Conference dinner |
Stephane Crépey: XVA analysis from the balance sheet
Abstract:
Since the 2008-09 financial crisis, derivative dealers charge to their clients various add-ons,
dubbed XVAs, meant to account for counterparty risk and its capital and funding implications.
As banks cannot replicate jump-to-default related cash flows, deals trigger wealth transfers from bank shareholders
to bondholders and shareholders need to set capital at risk. On this basis, we devise a theory of XVAs, whereby
the so-called contra-liabilities and cost of capital are sourced from bank clients at trade inceptions, on top of
the fair valuation of counterparty risk, in order to compensate shareholders for wealth transfer and risk on their
capital.
The resulting all-inclusive XVA formula, meant incrementally at every new deal, reads (CVA+FVA+KVA),
where C sits for credit, F for funding, and where the KVA is a cost of capital risk premium. All these XVAs are
nonnegative and, even though we do crucially include the default of the bank itself in our modeling, unilateral
in a certain sense. The corresponding XVA policy ensures to bank shareholders a submartingale wealth process
corresponding to a target hurdle rate on their capital at risk, consistently between and throughout deals
Mitja Stadje: On time-consistent and market-consistent evaluations
Abstract:
Pricing insurance payoffs with an inherent financial risk in a way consistent to market prices typically involves combining actuarial techniques with methods from mathematical finance. We propose to extend standard actuarial principles by a new market-consistent evaluation procedure which we call ‘two step market evaluation.’ We give a complete axiomatic characterization for two step market evaluations and show that in a dynamic setting with continuous stock prices every evaluation which is time-consistent and market-consistent is a two step market evaluation. We also show many other appealing properties of two step market evaluations.