Details
| Original language | English |
|---|---|
| Pages (from-to) | 813-837 |
| Number of pages | 25 |
| Journal | Astin bulletin |
| Volume | 51 |
| Issue number | 3 |
| Publication status | Published - 6 Aug 2021 |
Abstract
In the context of the Solvency II directive, the operation of an internal risk model is a possible way for risk assessment and for the determination of the solvency capital requirement of an insurance company in the European Union. A Monte Carlo procedure is customary to generate a model output. To be compliant with the directive, validation of the internal risk model is conducted on the basis of the model output. For this purpose, we suggest a new test for checking whether there is a significant change in the modeled solvency capital requirement. Asymptotic properties of the test statistic are investigated and a bootstrap approximation is justified. A simulation study investigates the performance of the test in the finite sample case and confirms the theoretical results. The internal risk model and the application of the test is illustrated in a simplified example. The method has more general usage for inference of a broad class of law-invariant and coherent risk measures on the basis of a paired sample.
Keywords
- Bootstrap, Empirical process, Functional Delta method, Hadamard differentiability, Paired sample
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Astin bulletin, Vol. 51, No. 3, 06.08.2021, p. 813-837.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Test for changes in the modeled solvency capital requirement of an internal risk model
AU - Gaigall, Daniel
PY - 2021/8/6
Y1 - 2021/8/6
N2 - In the context of the Solvency II directive, the operation of an internal risk model is a possible way for risk assessment and for the determination of the solvency capital requirement of an insurance company in the European Union. A Monte Carlo procedure is customary to generate a model output. To be compliant with the directive, validation of the internal risk model is conducted on the basis of the model output. For this purpose, we suggest a new test for checking whether there is a significant change in the modeled solvency capital requirement. Asymptotic properties of the test statistic are investigated and a bootstrap approximation is justified. A simulation study investigates the performance of the test in the finite sample case and confirms the theoretical results. The internal risk model and the application of the test is illustrated in a simplified example. The method has more general usage for inference of a broad class of law-invariant and coherent risk measures on the basis of a paired sample.
AB - In the context of the Solvency II directive, the operation of an internal risk model is a possible way for risk assessment and for the determination of the solvency capital requirement of an insurance company in the European Union. A Monte Carlo procedure is customary to generate a model output. To be compliant with the directive, validation of the internal risk model is conducted on the basis of the model output. For this purpose, we suggest a new test for checking whether there is a significant change in the modeled solvency capital requirement. Asymptotic properties of the test statistic are investigated and a bootstrap approximation is justified. A simulation study investigates the performance of the test in the finite sample case and confirms the theoretical results. The internal risk model and the application of the test is illustrated in a simplified example. The method has more general usage for inference of a broad class of law-invariant and coherent risk measures on the basis of a paired sample.
KW - Bootstrap
KW - Empirical process
KW - Functional Delta method
KW - Hadamard differentiability
KW - Paired sample
UR - http://www.scopus.com/inward/record.url?scp=85113257583&partnerID=8YFLogxK
U2 - 10.1017/asb.2021.20
DO - 10.1017/asb.2021.20
M3 - Article
AN - SCOPUS:85113257583
VL - 51
SP - 813
EP - 837
JO - Astin bulletin
JF - Astin bulletin
SN - 0515-0361
IS - 3
ER -