Risk Analysis in Finance and Insurance

Published:
September 25, 2003 by Chapman and Hall/CRC - 272 Pages
Author(s):
Alexander Melnikov, University of Alberta, Edmonton, Canada

Purchasing Options

Hardback
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ISBN 9781584884293
Cat# C429
 

Features

  • Offers the first comprehensive, interdisciplinary treatment of risk management based on modern stochastic analysis
  • Presents unified methodologies applicable to both finance and insurance
  • Contains a simplified presentation of pricing for financial and insurance derivative securities that facilitates understanding
  • Discusses new and innovative ideas such as superhedging, quantile hedging, markets with constraints, and real options
  • Includes exercises with hints and solutions and provides programming codes at www.crcpress.com/e_products/downloads/download.asp?cat_no=C429

    • Summary

    Historically, financial and insurance risks were separate subjects most often analyzed using qualitative methods. The development of quantitative methods based on stochastic analysis is an important achievement of modern financial mathematics, one that can naturally be extended and applied in actuarial mathematics.

    Risk Analysis in Finance and Insurance offers the first comprehensive and accessible introduction to the ideas, methods, and probabilistic models that have transformed risk management into a quantitative science and led to unified methods for analyzing insurance and finance risks. The author's approach is based on a methodology for estimating the present value of future payments given current financial, insurance, and other information, which leads to proper, practical definitions of the price of a financial contract, the premium for an insurance policy, and the reserve of an insurance company.

    Self-contained and full of exercises and worked examples, Risk Analysis in Finance and Insurance serves equally well as a text for courses in financial and actuarial mathematics and as a valuable reference for financial analysts and actuaries. Ancillary electronic materials will be available for download from the publisher's Web site.

    Table of Contents

    FOUNDATIONS OF FINANCIAL RISK MANAGEMENT
    Introductory Concepts of the Securities Market. Subject of Financial Mathematics
    Probabilistic Foundations of Financial Modelling and Pricing of Contingent Claims
    The Binomial Model of a Financial Market. Absence of Arbitrage, Uniqueness of a Risk-Neutral Probability Measure, Martingale Representation
    Hedging Contingent Claims in the Binomial Market Model. The Cox-Ross-Rubinstein Formula. Forwards and Futures
    Pricing and Hedging American options
    Utility Functions and St. Petersburg's Paradox. The Problem of Optimal Investment
    The Term Structure of Prices, Hedging and Investment Strategies in the Ho-Lee Model
    ADVANCED ANALYSIS OF FINANCIAL RISKS
    Fundamental Theorems on Arbitrage and Completeness. Pricing and Hedging Contingent Claims in Complete and Incomplete Markets.
    The Structure of Options Prices in Incomplete Markets and in Markets with Constraints. Options-Based Investment Strategies .
    Hedging Contingent Claims in Mean Square
    Gaussian Model of a Financial Market and Pricing in Flexible Insurance Models. Discrete Version of the Black-Scholes Formula .
    The Transition from the Binomial Model of a Financial Market to a Continuous Model. The Black-Scholes Formula and Equation.
    The Black-Scholes Model. "Greek" Parameters in Risk Management. Hedging under Dividends and Budget Constraints. Optimal Investment
    Assets with Fixed Income
    Real options: Pricing Long-Term Investment Projects
    Technical Analysis in Risk Management
    INSURANCE RISKS. FOUNDATIONS OF ACTUARIAL ANALYSIS
    Modelling Risk in Insurance and Methodologies of Premium Calculations
    Probability of Bankruptcy as a Measure of Solvency of an Insurance Company
    Solvency of an Insurance Company and Investment Portfolios
    Risks in Traditional and Innovative Methods in Life Insurance
    Reinsurance Risks
    Extended Analysis of Insurance Risks in a Generalized Cram´er-Lundberg Model
    APPENDICES
    Software Supplement: Computations in Finance And Insurance
    Problems and Solutions
    Bibliographic Remark
    References
    Glossary of Notation
    INDEX

    Editorial Reviews

    "… a useful addition to a rapidly expanding field."
    - Journal of the Royal Statistical Society


    "Here is a comprehensive and accessible introduction to the ideas, methods and probabilistic models that have transformed risk management into a quantitative science and led to unified methods for analyzing insurance and finance risk."
    -Business Horizons

    "Risk Analysis in Finance and Insurance by Dr. Alexander Melnikov is a self-contained and highly comprehensible introduction to mathematical finance and its interplay with insurance risk analysis. Students will like the book due to the many worked-out examples deepening the understanding of the theory. A special and probably unique feature of the book is its unified approach to financial and insurance risks. As a consequence of the convergence of financial and insurance markets, practitioners in financial institutions will have great benefit from books like Melnikov's covering mathematical approaches to risk analysis in both markets in a consistent manner."
    - Dr. Christian Bluhm, HypoVereinsbank, Munich, Germany

    Downloads Updates


    Resource OS Platform Updated Description Instructions
    C429.zip All Windows Version April 01, 2003

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