Optimal cross hedging for insurance derivatives

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dc.creatorAnkirchner, Stefan
dc.creatorImkeller, Peter
dc.creatorPopier, Alexandre
dc.date2007-05-25
dc.date.accessioned2026-07-07T12:10:23Z
dc.date.available2026-07-07T12:10:23Z
dc.descriptionWe consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal strategies for exponential utility from terminal wealth, determine the indifference prices of the derivatives, and interpret them in terms of diversification pressure. Moreover we check the optimal investment strategies for standard admissibility criteria. Finally we compare the static risk connected with an insurance derivative to the reduced risk due to a dynamic investment into the correlated asset. We show that dynamic hedging reduces the risk aversion in terms of entropic risk measures by a factor related to the correlation.
dc.description27 pages
dc.identifierhttps://arxiv.org/abs/0705.3760
dc.identifierhttp://arxiv.org/abs/0705.3760
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/209921
dc.subjectPricing of Securities
dc.subjectOptimization and Control
dc.subjectProbability
dc.subjectRisk Management
dc.titleOptimal cross hedging for insurance derivatives
dc.typetext

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