Journal of Risk Finance: Volume 3 Issue 3

The Impact of Liquidity Risk on the Prices of Swaps with Default Risk

GEORGE L. YE

Liquidity risk, i.e., the likelihood that a swap can be “sold” (i.e., assigned) may affect swap prices. This article addresses the importance of liquidity risk as a factor in the…

The Properties of Incremental VaR in Monte Carlo Simulations

ZHENG WANG

Incremental value‐at‐risk (VaR) is used to measure the effectiveness of diversification. However, the statistical properties of the estimated incremental VaR have not been fully…

Thoughts on Credit Risk Diversification: Comparing Credit Ratings Volatility Across Asset Classes

PETER RUBINSTEIN, LEO M. TILMAN, ALAN TODD

This article discusses credit migration of diversified loan pool securitizations, as evidenced by the ratings transitions of mortgage‐backed securities (MBS) and asset‐backed…

What Drives Financial Innovation in the Insurance Industry?

DAVID LASTER, MAYANK RATURI

This article describes the forces that drive financial innovation in the insurance industry, as it relates to the convergence between insurance and capital markets. The authors…

The Pricing of Insurance‐Linked Securities Under Interest Rate Uncertainty

PATRICE PONCET, VICTOR E. VAUGIRARD

In this article, the authors develop an arbitrage approach to valuing insurance‐linked securities (ILS) for non‐catastrophic events within a framework of stochastic interest…

Market Value of Insurance Contracts with Profit Sharing

PIETER BOUWKNEGT, ANTOON PELSSER

The valuation of insurance contracts using a market value (i.e., fair value) approach has recently attracted considerable interest. The authors illustrate how to determine the…

An Introduction to Credit Derivatives

GUNTER DUFEY, FLORIAN REHM

The authors provide the reader with a simple introduction to credit derivatives. The article includes a broad overview of the market, estimates of the global market size, and a…