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Implementing Dynamic Financial Analysis
Type
fundamental research project
Start Date
01 January 2006
End Date
31 December 2006
Status
completed
Keywords
Risk Management
Asset Liability Management
Dynamic Financial Analysis
Simulation
Solvency II
Swiss Solvency Test
International Financial Reporting Standards (IFRS)
Description
In the changing business environment of the last few years, dynamic financial analysis (DFA) has become an important tool for the analysis of an insurance company's financial situation. Using a simulation-based approach, DFA models an insurance company's cash flow in order to forecast assets, liabilities, and ruin probabilities, as well as full balance sheets for different future scenarios. DFA offers flexible modeling and many analysis possibilities; however, its implementation involves numerous problems.
In the following research project, we wish to concentrate on these problems of DFA implementation, problems that have not been adequately considered in the DFA literature so far. But, we won't stop
adressing these problems, as we will also point out possible methods for overcoming these problems and integrate these methods into a DFA modeling framework. Thus, our research plan consists of
classification, conception, and implementation of DFA.
In the following research project, we wish to concentrate on these problems of DFA implementation, problems that have not been adequately considered in the DFA literature so far. But, we won't stop
adressing these problems, as we will also point out possible methods for overcoming these problems and integrate these methods into a DFA modeling framework. Thus, our research plan consists of
classification, conception, and implementation of DFA.
Leader contributor(s)
Member contributor(s)
Parnitzke, Thomas
Funder(s)
Topic(s)
Dynamic Financial Analysis (classification and conception)
Dynamic Financial Analysis (model design
Dynamic Financial Analysis (model design
e.g. the implementation of management behavior or the correct mapping of dependence structures)
Method(s)
statistical and actuarial methods
performance analysis
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
21863
6 results
Now showing
1 - 6 of 6
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PublicationType: newspaper articleJournal: Zeitschrift für VersicherungswesenVolume: 57Issue: 18
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PublicationType: newspaper articleJournal: VersicherungswirtschaftVolume: 61Issue: 6
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PublicationManagement Strategies and Dynamic Financial AnalysisDynamic financial analysis (DFA) has become an important tool in analyzing the financial situation of insurance companies. Constant development and documentation of DFA tools has occurred during the last years. However, several questions concerning the implementation of DFA systems have not been answered in the DFA literature to date. One such important issue is the consideration of management strategies in the DFA context. The aim of this paper is to study the effects of different management strategies on a non-life insurer's risk and return profile. Therefore, we develop several management strategies and test them numerially within a DFA simulation study.Type: journal articleJournal: VarianceVolume: 2Issue: 1
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PublicationHerausforderungen bei der IT-Umsetzung von Asset Liability Management(Verlag Versicherungswirtschaft GmbH, 2008-10-01)Steger, MarkusType: newspaper articleJournal: VersicherungswirtschaftIssue: 20
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PublicationAn Analysis of Pricing and Basis Risk for Industry Loss WarrantiesIn recent years, industry loss warranties (ILWs) have become increasingly popular in the reinsurance market. The defining feature of ILW contracts is their dependence on an industry loss index. The use of an index reduces moral hazard and generally results in lower prices compared to traditional, purely indemnity-based reinsurance contracts. However, use of the index also introduces basis risk since the industry loss and the reinsured company's loss are usually not fully correlated. The aim of this paper is to simultaneously examine basis risk and pricing of an indemnity-based industry loss warranty contract, which is done by comparing actuarial and financial pricing approaches for different measures of basis risk. Our numerical results show that modification of the contract parameters to reduce basis risk can either raise or lower prices, depending on the specific parameter choice. For instance, basis risk can be reduced by decreasing the industry loss trigger, which implies higher prices, or by increasing the reinsured company attachment, thus inducing lower prices.Type: journal articleJournal: Zeitschrift für die gesamte VersicherungswissenschaftVolume: 100Issue: 4
Scopus© Citations 3 -
PublicationA Management Rule of Thumb in Property-Liability InsuranceDue to substantial changes in competition, capital market conditions, and supervisory frameworks, holistic analysis of an insurance company’s assets and liabilities takes on special relevance. An important tool in this context is dynamic financial analysis (DFA). DFA is a systematic approach to financial modeling in which financial figures are projected under a variety of possible scenarios by showing how outcomes are affected by changing internal and/or external factors. The discussion in Europe about new risk-based capital standards (Solvency II project) and the development of International Financial Reporting Standards (IFRS), as well as expanding catastrophe claims, have made DFA an useful tool for cash flow projection and decision making, especially in the non-life and reinsurance businesses (for an overview, see [2]).Type: book section