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Risk minimization with inflation and interest rate risk: applications to non-life insurance

Author

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  • Jérôme Barbarin
  • Tanguy De Launois
  • Pierre Devolder

Abstract

This paper aims at studying the asset allocation problem of a non-life insurance company when inflation risk and interest rate risk are taken into account. To this purpose, we apply the risk-minimization theory developed by Föllmer & Sondermann (1986) and extended by Møller (2001). We derive the general form of the risk-minimizing strategies when the cumulative payments of the insurer are described, as suggested by Arjas (1989), by a process adapted to the natural filtration of a marked point process and when the inflation and the term structure of interest rates are simultaneously described by the HJM model of Jarrow & Yildirim (2003). We then apply our general results in two collective models and two individual models of non-life insurance payments.

Suggested Citation

  • Jérôme Barbarin & Tanguy De Launois & Pierre Devolder, 2009. "Risk minimization with inflation and interest rate risk: applications to non-life insurance," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2009(2), pages 119-151.
    • Handle: RePEc:taf:sactxx:v:2009:y:2009:i:2:p:119-151
    DOI: 10.1080/03461230802281047
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    Cited by:

    1. Guochen PAN & Tsangyao CHANG & Mei-Chih WANG & Mengqi LIU & Iuliana Carmen BĂRBĂCIORU, 2023. "Reassessing the Nexus between Insurance Activities and Economic Growth in China Through Quantile Approaches," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 57-71, December.

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