Abstract
The Solvency II framework requires insurers to marketconsistently value their own funds. The task is challenging given that insurance liabilities are typically not traded financial instruments and closedform solutions are mostly not available. One solution is to obtain an estimate of the future value of liabilities through pure Monte Carlo simulations, which, however, in riskcapital calculations quickly becomes too timeintensive. This thesis deals with Least Squares Monte Carlo (LSMC) approaches, RegressNow and RegressLater, that yield an approximation to the value of the insurance liabilities. The asymptotic properties of the methods are analyzed. It is shown that the Replicating Portfolio technique commonly applied by insurers, corresponds to LSMC with RegressLater. Thereby a theoretical foundation for the Replicating Portfolio technique is provided. Lastly, advantages and disadvantages of Replicating Portfolio and LSMC (with RegressNow) are discussed.
Original language  English 

Awarding Institution 

Supervisors/Advisors 

Award date  7 Oct 2016 
Place of Publication  Maastricht 
Publisher  
Print ISBNs  9789461595850 
Publication status  Published  2016 
Keywords
 riskcapital calculations
 insurers
 method
Cite this
Schweizer, J. (2016). Portfolio replication and least squares Monte Carlo with application to insurance risk management. Universitaire Pers Maastricht.