Capped borrower credit risk and insurer hedging during the COVID-19 outbreak

In this paper, we apply the risk-neutral valuation methodology to evaluate a life insurer's equity. We model the features capped by the explicit treatment of the borrowing firm's credit risk, the optimal guaranteed rate-setting, and the coronavirus disease (COVID-19) outbreak. The results...

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Detalles Bibliográficos
Autores principales: Chen, Shi, Yang, Yang, Lin, Jyh-Horng
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Inc. 2020
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7462787/
https://www.ncbi.nlm.nih.gov/pubmed/32905078
http://dx.doi.org/10.1016/j.frl.2020.101744
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author Chen, Shi
Yang, Yang
Lin, Jyh-Horng
author_facet Chen, Shi
Yang, Yang
Lin, Jyh-Horng
author_sort Chen, Shi
collection PubMed
description In this paper, we apply the risk-neutral valuation methodology to evaluate a life insurer's equity. We model the features capped by the explicit treatment of the borrowing firm's credit risk, the optimal guaranteed rate-setting, and the coronavirus disease (COVID-19) outbreak. The results show that the severe effect of the COVID-19 epidemic on the borrowing firm harms its insurance business but that stringent capital regulation helps. The severe impact of COVID-19 on both the borrowing firm and the insurer hedging harm policyholder protection, thereby adversely affecting insurance stability.
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spelling pubmed-74627872020-09-02 Capped borrower credit risk and insurer hedging during the COVID-19 outbreak Chen, Shi Yang, Yang Lin, Jyh-Horng Financ Res Lett Article In this paper, we apply the risk-neutral valuation methodology to evaluate a life insurer's equity. We model the features capped by the explicit treatment of the borrowing firm's credit risk, the optimal guaranteed rate-setting, and the coronavirus disease (COVID-19) outbreak. The results show that the severe effect of the COVID-19 epidemic on the borrowing firm harms its insurance business but that stringent capital regulation helps. The severe impact of COVID-19 on both the borrowing firm and the insurer hedging harm policyholder protection, thereby adversely affecting insurance stability. Elsevier Inc. 2020-10 2020-09-02 /pmc/articles/PMC7462787/ /pubmed/32905078 http://dx.doi.org/10.1016/j.frl.2020.101744 Text en © 2020 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Chen, Shi
Yang, Yang
Lin, Jyh-Horng
Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title_full Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title_fullStr Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title_full_unstemmed Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title_short Capped borrower credit risk and insurer hedging during the COVID-19 outbreak
title_sort capped borrower credit risk and insurer hedging during the covid-19 outbreak
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7462787/
https://www.ncbi.nlm.nih.gov/pubmed/32905078
http://dx.doi.org/10.1016/j.frl.2020.101744
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