Search results

1 – 3 of 3
Article
Publication date: 16 August 2011

Mariarosaria Coppola, Emilia Di Lorenzo, Albina Orlando and Marilena Sibillo

The demographic risk is the risk due to the uncertainty in the demographic scenario assumptions by which life insurance products are designed and valued. The uncertainty lies both…

2419

Abstract

Purpose

The demographic risk is the risk due to the uncertainty in the demographic scenario assumptions by which life insurance products are designed and valued. The uncertainty lies both in the accidental (insurance risk) and systematic (longevity risk) deviations of the number of deaths from the value anticipated for it. This last component gives rise to the risk due to the randomness in the choice of the survival model for valuations (model risk or projection risk). If the insurance risk component can be assumed negligible for well‐diversified portfolios, as in the case of pension annuities, longevity risk is crucial in the actuarial valuations. The question is particularly decisive in contexts in which the longevity phenomenon of the population is strong and pension annuity portfolios constitute a meaningful slice of the financial market – both typical elements of Western economies. The paper aims to focus on the solvency appraisal for a portfolio of life annuities, deepening the impact of the demographic risk according to suitable risk indexes apt to describe its evolution in time.

Design/methodology/approach

The financial quantity proposed for representing the economic wealth of the life insurance company is the stochastic surplus, and the paper analyses the impact on it of different demographic assumptions by means of risk indicators as the projection risk index, the quantile surplus valuation and the ruin probability. By means of the proposed models, the longevity risk is mainly taken into account in a stochastic scenario for the financial risk component, in order to consider their interactions, too. In order to furnish practical details significant in the portfolio risk management, several numerical applications clarify the practical meaning of the models in the solvency context.

Findings

This paper studies the impact on the portfolio surplus of the systematic demographic risk, taking into account their interaction with the financial risk sources. In this order of ideas, the internal risk profile of a life annuity portfolio is deeply investigated by means of suitable risk indexes: in a solvency analysis perspective, some possible scenarios for the evolution of death rates (generated by different survival models) are considered and this paper evaluates the impact on the portfolio surplus caused by different choices of the demographic model. The first index is deduced by a variance decomposition formula, the other ones involve the conditional quantile calculus and the ruin probability. Such indexes constitute benchmarks, whose conjoined use provides useful information to the meeting of the solvency requirements.

Originality/value

With respect to the recent actuarial literature, in which the most important contribution on the surplus analysis has been given by Lisenko et al. – where the analysis focuses on the financial aspect applied to portfolios of temporary and endowment contracts – the paper considers life annuity portfolios, taking into account the effect of the systematic demographic risk and its interactions with the financial risk components.

Details

The Journal of Risk Finance, vol. 12 no. 4
Type: Research Article
ISSN: 1526-5943

Keywords

Content available
Article
Publication date: 1 January 2013

113

Abstract

Details

The Journal of Risk Finance, vol. 14 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 14 February 2018

Xin Janet Ge

This paper aims to investigate the factors that contribute to the changes of house prices including ethnic factors. Australia is a multicultural country with diversified…

Abstract

Purpose

This paper aims to investigate the factors that contribute to the changes of house prices including ethnic factors. Australia is a multicultural country with diversified ethnicities. The median price of established houses (unstratified) in Sydney has reached a new record high of $910,000 in December 2015, increasing around 58.2 per cent from March 2011 [Australian Bureau of Statistics (ABS), 2015a]. However, the prices of some suburbs have increased more than prices of others.

Design/methodology/approach

Six suburbs that represent ethnic majority originally including White, India and China will be selected as pilot studies. Hedonic regression analysis will be applied for the analysis based on 2001, 2006 and 2011 census data.

Findings

It is found that the main drivers of house prices are the dwelling physical characteristics and accessibility to convenient transportation. The level of household income also plays an important role. However, the impact of changes of ethnic on changes of prices is not significant.

Research limitations/implications

The study adds to the growing literature on the ethnicity changes on dwelling prices and is important for understanding whether some of the clusters of ethnic concentration or segregation effects property markets. This study is significant in its understanding of the main characteristics of ethnic changes of suburbs in Sydney.

Practical implications

An implication is that policy makers can attract different ethnic groups and encourage multicultural communities when they formulate housing and planning policies.

Originality/value

The relationship between ethnicity and house price appreciation is not extensively studied in Australia. This research contributes to the literature on the effects of ethnic changes on house prices and implications of policy formulation to encourage multicultural communities.

Details

International Journal of Housing Markets and Analysis, vol. 13 no. 1
Type: Research Article
ISSN: 1753-8270

Keywords

1 – 3 of 3