Reduced-form setting under model uncertainty with non-linear affine intensities

Relatore:  Francesca Biagini - LMU Muenchen
  mercoledì 13 ottobre 2021 alle ore 12.00 Zoom Webinar.

In this talk we present a market model including financial assets and life insurance liabilities within a reduced-form framework under model uncertainty by following [1]. In particular we extend this framework to include mortality intensities following an affine process under parameter uncertainty, as defined in [2].

This allows both to introduce the definition of a longevity bond under model uncertainty in a consistent way with the classical case under one prior, as well as to compute it by explicit formulas or by numerical methods. We also study conditions to guarantee the existence of a càdlàg modification for the longevity bond’s value process. Furthermore, we show how the resulting market model extended with the longevity bond is arbitrage-free and study arbitrage-free pricing of contingent claims or life insurance liabilities in this setting.

[1] Francesca Biagini and Yinglin Zhang. Reduced-form framework under
model uncertainty. The Annals of Applied Probability, 29(4):2481–2522,
[2] Francesca Biagini and Katharina Oberpriller. Reduced-form framework
under model uncertainty. accepted on Probability, Uncertainty and
Quantitative Risk, 2021.
[3] Tolulope Fadina, Ariel Neufeld, and Thorsten Schmidt. Affine
processes under parameter uncertainty. Probability, Uncertainty and
Quantitative Risk [] volume 4 (5),

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Alessandro Gnoatto

Data pubblicazione
9 agosto 2021