IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00847887.html
   My bibliography  Save this paper

An effective equity model allowing long term investments within the framework of Solvency II

Author

Listed:
  • Mohamed Majri

    () (SMABTP - SMABTP)

  • François-Xavier De Lauzon

    (SMABTP - SMABTP)

Abstract

We propose an effective equity model adapted for medium term and long term risk assessment. One of its specific aspects is to allow an asymetrical dampening of the equity risk (called the dampener effect) conditional to the cyclical level of equity prices and to enable accurate Value At Risk assessements for medium and long term horizons (1 year and beyond). For a set of selected equity indexes we compare its relevancy for the 1-year 99.5% Value At Risk (VaR) assessment with the different releases of the Solvency II dampener equity models. In a second step we test its relevancy for VaR assessments beyond a 1 year investment horizon. We show in our analysis that this alternative model gives quite good results and outperforms widely the others tested. It appears particularly suitable for insurance companies and pension funds given their medium or long term asset management process.

Suggested Citation

  • Mohamed Majri & François-Xavier De Lauzon, 2013. "An effective equity model allowing long term investments within the framework of Solvency II," Working Papers hal-00847887, HAL.
  • Handle: RePEc:hal:wpaper:hal-00847887 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00847887
    as

    Download full text from publisher

    File URL: https://hal.archives-ouvertes.fr/hal-00847887/document
    Download Restriction: no

    References listed on IDEAS

    as
    1. Martin Eling & Hato Schmeiser & Joan T. Schmit, 2007. "The Solvency II Process: Overview and Critical Analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 69-85, March.
    2. Eling, Martin & Pankoke, David, 2013. "Basis Risk, Procylicality, and Systemic Risk in the Solvency II Equity Risk Module," Working Papers on Finance 1306, University of St. Gallen, School of Finance.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Value-At-Risk; Long term Equity Risk Assessment; Solvency II; Dampener; Standard Formula; Back Testing;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00847887. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.