Best-estimates in bond markets with reinvestment risk
dc.contributor.author
Wüthrich, Mario V.
dc.contributor.author
MacKay, Anne
dc.date.accessioned
2019-09-12T11:49:12Z
dc.date.available
2017-06-11T21:09:47Z
dc.date.available
2019-09-11T09:39:08Z
dc.date.available
2019-09-12T11:49:12Z
dc.date.issued
2015
dc.identifier.other
10.3390/risks3030250
en_US
dc.identifier.uri
http://hdl.handle.net/20.500.11850/106829
dc.identifier.doi
10.3929/ethz-b-000106829
dc.description.abstract
The concept of best-estimate, prescribed by regulators to value insurance liabilities for accounting and solvency purposes, has recently been discussed extensively in the industry and related academic literature. To differentiate hedgeable and non-hedgeable risks in a general case, recent literature defines best-estimates using orthogonal projections of a claim on the space of replicable payoffs. In this paper, we apply this concept of best-estimate to long-maturity claims in a market with reinvestment risk, since in this case the total liability cannot easily be separated into hedgeable and non-hedgeable parts. We assume that a limited number of short-maturity bonds are traded, and derive the best-estimate price of bonds with longer maturities, thus obtaining a best-estimate yield curve. We therefore use the multifactor Vasiˇcek model and derive within this framework closed-form expressions for the best-estimate prices of long-term bonds.
en_US
dc.format
application/pdf
en_US
dc.language.iso
en
en_US
dc.publisher
MDPI
en_US
dc.rights.uri
http://creativecommons.org/licenses/by/4.0/
dc.subject
Best-estimate price
en_US
dc.subject
Reinvestment risk
en_US
dc.subject
Dynamic hedging
en_US
dc.subject
Sequential local risk minimization
en_US
dc.subject
Incomplete market
en_US
dc.subject
State-price deflator
en_US
dc.subject
Long-term bonds
en_US
dc.title
Best-estimates in bond markets with reinvestment risk
en_US
dc.type
Journal Article
dc.rights.license
Creative Commons Attribution 4.0 International
dc.date.published
2015-07-16
ethz.journal.title
Risks
ethz.journal.volume
3
en_US
ethz.journal.issue
3
en_US
ethz.pages.start
250
en_US
ethz.pages.end
276
en_US
ethz.version.deposit
publishedVersion
en_US
ethz.publication.place
Basel
en_US
ethz.publication.status
published
en_US
ethz.leitzahl
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02000 - Dep. Mathematik / Dep. of Mathematics::02003 - Mathematik Selbständige Professuren::08813 - Wüthrich, Mario Valentin (Tit.-Prof.)
en_US
ethz.leitzahl.certified
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02000 - Dep. Mathematik / Dep. of Mathematics::02003 - Mathematik Selbständige Professuren::08813 - Wüthrich, Mario Valentin (Tit.-Prof.)
ethz.date.deposited
2017-06-11T21:10:47Z
ethz.source
ECIT
ethz.identifier.importid
imp593653af12ef726863
ethz.ecitpid
pub:167243
ethz.eth
yes
en_US
ethz.availability
Open access
en_US
ethz.rosetta.installDate
2017-07-18T12:33:12Z
ethz.rosetta.lastUpdated
2024-02-02T09:20:56Z
ethz.rosetta.versionExported
true
ethz.COinS
ctx_ver=Z39.88-2004&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.atitle=Best-estimates%20in%20bond%20markets%20with%20reinvestment%20risk&rft.jtitle=Risks&rft.date=2015&rft.volume=3&rft.issue=3&rft.spage=250&rft.epage=276&rft.au=W%C3%BCthrich,%20Mario%20V.&MacKay,%20Anne&rft.genre=article&rft_id=info:doi/10.3390/risks3030250&
Files in this item
Publication type
-
Journal Article [133569]