401-4920-00L  Market-Consistent Actuarial Valuation

Semester Spring Semester 2016
Lecturers M. V. Wüthrich, H. Furrer
Periodicity two-yearly course
Language of instruction English

Abstract Introduction to market-consistent actuarial valuation.
Topics: Stochastic discounting, full balance sheet approach, valuation portfolio in life and non-life insurance, technical and financial risks, risk management for insurance companies.
Objective Goal is to give the basic mathematical tools for describing insurance products within a financial market and economic environment and provide the basics of solvency considerations.
Content In this lecture we give a full balance sheet approach to the task of actuarial valuation of an insurance company. Therefore we introduce a multidimensional valuation portfolio (VaPo) on the liability side of the balance sheet. The basis of this multidimensional VaPo is a set of financial instruments. This approach makes the liability side of the balance sheet directly comparable to its asset side.

The lecture is based on four sections:
1) Stochastic discounting
2) Construction of a multidimensional Valuation Portfolio for life insurance products (with guarantees)
3) Construction of a multidimensional Valuation Portfolio for a run-off portfolio of a non-life insurance company
4) Measuring financial risks in a full balance sheet approach (ALM risks)
Literature Market-Consistent Actuarial Valuation, 2nd edition.
Wüthrich, M.V., Bühlmann, H., Furrer, H.
EAA Series Textbook, Springer, 2010.
ISBN: 978-3-642-14851-4

Wüthrich, M.V., Merz, M.
Claims Run-Off Uncertainty: The Full Picture
SSRN Manuscript ID 2524352 (2015).

Wüthrich, M.V., Embrechts, P., Tsanakas, A.
Risk margin for a non-life insurance run-off.
Statistics & Risk Modeling 28 (2011), no. 4, 299--317.

Financial Modeling, Actuarial Valuation and Solvency in Insurance.
Wüthrich, M.V., Merz, M.
Springer Finance 2013.
ISBN: 978-3-642-31391-2
Prerequisites / Notice The exams ONLY take place during the official ETH examination period.

This course will be held in English and counts towards the diploma of "Aktuar SAV".
For the latter, see details under www.actuaries.ch.

Knowledge in probability theory, stochastic processes and statistics is assumed.