Some insurance firms are faced with the unique challenge of managing risks that are large, infrequent, and potentially highly correlated within geographic regions and/or across product lines. An example of this is crop insurance, which includes weather risk, and leads to a portfolio of risks with high variance. A solution to this problem is undertaken in this study, through using a combination of pooling and private reinsurance in a portfolio approach. This approach takes advantage of offsetting risks across regions, in order to reduce risk in a cost effective manner. An asset liability management (ALM) approach is used to examine the entire crop insurance sector for Canada. This is the first study to focus on pooling for an entire insurance sector in a country, and it uses all major crops from 1978-2009, across 10 regions (provinces). Chapter two develops an innovative insurance portfolio under a full premium pool, combining a self managed insurance pool and private reinsurance using the coefficient of variation (CV) of the loss coverage ratio (LCR), Model 3. Results show that this portfolio approach reduces risk across regions. Chapter three, in contrast to chapter two, uses a reinsurance premium pool, where regions contribute only a portion of their risk to a reinsurance pool. An improved insurance portfolio model is developed in chapter three, using combinatorial optimization with a genetic algorithm to combine a self managed reinsurance pool and private reinsurance, Model C. Results show that this reinsurance portfolio model efficiently reduces risk. Chapter four uses a similar approach to chapter three, except that it allows for dependence (correlation) across regions. Results for this model (Model CC) are consistent with those of chapter three, indicating the effectiveness of the portfolio approach when correlation is present across regions. Overall, the portfolio models developed in each of the three chapters (Model 1, Model C, and Model CC), produce acceptable surplus, survival probability, and deficit at ruin, indicating that the portfolio approach using pooling is efficient for reducing risk. Beyond crop insurance, the portfolio models can be applied to other large natural disaster and weather related insurance, and other portfolio applications.

Thesis (M.S.)--University of Missouri-Columbia, 2004. / Typescript. Includes bibliographical references (leaves 133-138). Also available on the Internet.

Thesis (M.S.)--University of Missouri-Columbia, 2004. / Typescript. Includes bibliographical references (leaves 133-138). Also available on the Internet.

This thesis presents three empirical analyses on the systematic risk exposure that global and domestic asset holders face. Each paper investigates a distinct source of macroeconomic risk, but they all stem from the premise that holding human capital and financial assets is risky. This ultimately affects agents' optimal consumption choices. The first paper, The International CAPM Redux, proposes a novel empirical model to price international assets. Building on recent advances in asset pricing research on currency markets, it documents that investors are compensated for bearing exposure to currency risk when investing in foreign equity, either directly or via delegated portfolios of international assets. The second paper, One Central Bank To Rule Them All, shows that while global investors demand a premium to bear risks associated with Federal Reserve decisions, there is no comparable result for other major central banks. This puzzling finding points to the uniqueness of the Federal Reserve for global investors, that does not simply stem from the size and importance of the U.S. economy. The third paper, Human Capital, Unemployment Risk and Asset Prices, relates the riskiness of human capital to uncertainty in the labour market and documents a role for unemployment as a determinant of human wealth. Sorting U.S. industry-level portfolios by differential exposure to unemployment risk yields a novel cross-section of average excess returns. High risk-premia are consistent with less income-constrained highly educated workers willing to take financial risk beyond hedging their labour income risk. Taken together, these three studies contribute to the empirical asset pricing literature and open the door to further theoretical and empirical research in the field.

Detection of 'anomalies', empirical regularities that are inexplicable within a preeminent or accepted paradigm, is a key aspect of the operation of scientific endeavour. The dominant theories of financial economics, those deriving from the CAPM/APT literature, hold that there should not exist persistent differences in the returns to assets across calendar frequencies. An extensive review of the literature reveals that in a wide variety of assets and markets there is evidence that returns differ according to the calendar frequency, in particular across days of the week and months of the year and around recurrent holidays. However, this review also reveals considerable room for increased methodological and statistical sophistication. In particular, the nature and extent of the data indicate that techniques based on robust regression, non-parametric statistics and Bayesian inference are more appropriate than the predominantly OLS based approaches displayed in the literature. Papers that adopt these more sophisticated approaches generally find much weaker evidence for such calendar anomalies. In essence, the Irish Stock Exchange operated free from exchange controls and in a broadly homogenous monetary and economic environment from 1988 to 1998. Daily returns from 1988 to 1998, on official equity indices, and from 1993 to 1998 on equal and value weighted equity indices, are examined. The evidence is that even when more sophisticated and appropriate techniques are used there is still some evidence for a daily pattern in the returns to these indices. However this pattern is dissimilar to that found elsewhere, consisting of a midweek positive peak as opposed to the more commonly found low returns at the start of the week and higher returns on Friday. This pattern is not a function of the settlement system, does not appear to be related to the pattern of either microeconomic (firm-specific) or macroeconomic information releases, nor does it appear to be a function of endogenous news generation. Previous international research indicates a January peak in returns, while previous research on the Irish market had also found an April peak. While the investigation here of the monthly pattern of returns confirms, in a statistically and methodologically robust manner, the January peak no evidence is found of an April peak. Examination of the return pattern around exchange holidays indicates that, in common with other markets referenced in the literature, there is a rise in returns before a holiday. However, on decomposition into local and international components we find that although the local effect is strong this effect is negative, which is a major point of departure from previous research findings.

Businesses are continuously exposed to a changing business environment which may either exert positive or negative influences on profitability. The banking industry, in particular, is highly competitive and bank failures can have significant consequences for customers. Commercial banks, therefore, have a responsibility to protect their customers by implementing sound risk management strategies. In light of the recent financial crises (since 2007), risk management has once again become a popular topic of discussion since adequate risk management should have prevented or minimised the impact of the risks faced by failed banks. The primary objective of this study was to develop a framework that could be used by South African commercial banks to investigate risk management. Qualitative research was conducted in this regard. From this, findings and recommendations were derived in order to provide banks with a tool by which they could assess their exposure to risk. Various journals, websites, newspapers, bank reports and textbooks were consulted in support of the literature. The literature provided background information on the history and development of the risk management process. Considerable attention was given to the categories of risk that an adequate risk management framework should address. Furthermore, the current models used to manage risk in commercial bank were provided, as well as the specific reasons for bank failures. The main findings of this study were the identification of the most significant reasons for banking failures. These were identified as capital inadequacy, credit risk due to non-performing loans and a lack of banking supervision. In addition to these reasons, several other contributing principles were identified as important factors to be included in a risk management framework. A risk management framework was thus constructed in Table 5.1 based on the literature regarding global banking failures and the relevant conclusions made by the researcher.

BAKGRUND: Samtidigt som företag och finansiella institutioner idag har utvecklat avancerade Asset Liability Management-verktyg för att proaktivt hantera sina risker och planera framtida kassaflöden, så baseras dagens privatekonomiska rådgivning fortfarande på traditionella tillgångsallokeringsstrategier och enkla tumregler. Tidigare forskning menar på att liknande ALM-verktyg skulle kunna generera mervärde även för privatpersoner om de implementerades i praktiken, men vad de privata spararna själv tycker i frågan är hitintills outforskat. Trots detta kvarstår faktum att endast om privatpersonen själv ställer sig positiv till verktyget kan teori med fördel implementeras i praktiken. SYFTE: Studiens syfte är att undersöka och analysera den privata spararens inställning och kapacitet att ta till sig rådgivning baserat på ALM, och se om ett ALM-verktyg kan skapa mervärde i den privatekonomiska rådgivningen. GENOMFÖRANDE: Studien har utförts genom kvalitativa intervjuer med 10 privatpersoner. Författarna har skapat scenarier för en fiktiv person, där en ALM-analys visuellt har presenterats under intervjuerna. Genom att ställa frågor kopplade till scenarier har studien kunnat analysera privatpersonens vilja till att delge och förstå den information en ALM-analys genererar, samt dess inställning till att proaktivt planera sin ekonomiska framtid. SLUTSATS: Studien visar att ALM största mervärdesskapande för den privata spararen återfinns i privatpersonens intresse för att visualisera sin ekonomi. En bristande riskförståelse i kombination med en tydlig avsaknad av ekonomiska ambitioner hos den privata spararen försvagar dock verktygets användningsområde. Vidare behöver ALM-verktyget övervinna flertalet begränsat rationella beteenden och förtroendeaspekter för att skapa mervärde ur en privatpersons perspektiv. / BACKGROUND: Companies and financial institutions have developed advanced tools based on the theories of Asset Liability Management with purpose to proactively manage risks and plan future cash flows. At the same time, private financial advising of today is still based on traditional asset allocation methodologies and rules of thumbs. Previous research concludes that similar ALM-tools could add value for private investors in the financial advising, but the private investors’ perspective in the matter is still unexplored. The fact remains that only if the private investors are convinced that ALM can add value, can a tool with theoretical advantages be successfully implemented in practice. AIM: The aim of this thesis is to test and analyze the individual investors’ attitude and capacity to understand private financial advising based on ALM as methodology, and analyze whether an ALM tool adds value in private financial advising. COMPLETION: The thesis has been conducted by ten individual interviews in a qualitative manner. The authors have created a fictitious ALM-analysis that has been presented for all of the respondents. By asking questions connected to scenarios, the study have been able to analyze the individuals’ attitude to share and receive personal information, as well as their attitude to proactively plan their financial future. CONCLUSION: The study concludes that the biggest value-creating aspect of ALM is that individuals show a great interest in visualizing their own financial future. However, a financial illiteracy in combination with a lack of clear-cut financial ambitions, weakens the ALM-tools area of use for the individual. Furthermore, ALM need to overcome barriers in individuals limited rational behavior and simultaneously create a strong trust to maximize the value-creation for the individual.

Thesis (MBA)--Stellenbosch University, 2003. / ENGLISH ABSTRACT: This paper investigates fund manager performance in order to determine whether some fund managers are better than others. The focus of the paper is to examine if fund performance is related to the characteristics of fund managers that may indicate ability, knowledge, or effort. The data consists of South African regulated unit trust growth and growth-and-income funds investigated over a seven-year period, and comprehensive and detailed information on the various fund managers supplied by the MoneyMate database from the University of Stellenbosch. The research objective has been to find out whether fund manager characteristics help explain fund performance and risk. Stepwise regression analysis as the research methodology is applied, where the two dependent variables, performance and risk, are regressed on the eight independent variables; manager age, tenure of the manager with the fund, years of education, whether the manager hold a MBA or CA/CFA qualification, management team size, fund age and fund objective. The findings of the study are highly significant and show that fund performance and risk are impacted upon by managers' qualifications. One can expect better risk-adjusted performance from a fund manager who holds a CA/CFA and/or MBA qualification. Results show that these managers outperform managers without these qualifications. / AFRIKAANSE OPSOMMING: Hierdie studie ondersoek fondsbestuurder prestasie met die doel om te bepaal of sommige bestuurders beter is as ander. Die fokus van die studie ondersoek of fondsprestasie verband hou met die eienskappe van fondsbestuurders. Die data bestaan uit Suid-Afrikaanse effektetrust groei en groei-en-inkomste fondse bestudeer oor 'n periode van sewe jaar, en omvattende besonderhede van die fondsbestuurders soos verskaf deur die MoneyMate databasis van die Universiteit van Stellenbosch. Die doel van die navorsing is om bewyse te vind wat mag aandui dat fondsbestuurdereienskappe wel fondsprestasie en risiko's kan beïnvloed en verduidelik. Die metode van stapsgewyse regressie word toegepas, waar die impak van die agt onafhanklike veranderlikes (ouderdom van die fondsbestuurder, sy jare by die fonds, sy aantal jare van tersiêre onderrig, of die bestuurder 'n MBA of CA/CFA kwalifikasie besit, spangrootte, ouderdom van die fonds en die fonds se doelstelling) op die twee afhanklike veranderlikes (prestasie en risiko) ondersoek word. Die bevindinge van die studie is hoogs betekenisvol en dui daarop dat 'n fonds se prestasie en risiko's wel beïnvloed word deur die kwalifikasies van die fondsbestuurder. Beter risiko aangepaste prestasies kan verwag word van bestuurders wat 'n MBA en/of CA/CFA kwalifikasie besit. Die resultate toon wel dat fonds bestuurders ander bestuurders uitpresteer wat nie daardie kwalifikasie besit nie.

Call number: LD2668 .T4 1986 V36 / Master of Science / Agricultural Economics

A incerteza é um elemento fundamental da realidade. Então, torna-se natural a busca por métodos que nos permitam representar o desconhecido em termos matemáticos. Esses problemas originam uma grande classe de programas probabilísticos reconhecidos como modelos de programação estocástica. Eles são mais realísticos que os modelos determinísticos, e tem por objetivo incorporar a incerteza em suas definições. Essa tese aborda os problemas probabilísticos da classe de problemas de multi-estágio com incerteza e com restrições probabilísticas e com restrições probabilísticas conjuntas. Inicialmente, nós propomos um modelo de administração de ativos e passivos multi-estágio estocástico para a indústria de fundos de pensão brasileira. Nosso modelo é formalizado em conformidade com a leis e políticas brasileiras. A seguir, dada a relevância dos dados de entrada para esses modelos de otimização, tornamos nossa atenção às diferentes técnicas de amostragem. Elas compõem o processo de discretização desses modelos estocásticos Nós verificamos como as diferentes metodologias de amostragem impactam a solução final e a alocação do portfólio, destacando boas opções para modelos de administração de ativos e passivos. Finalmente, nós propomos um “framework” para a geração de árvores de cenário e otimização de modelos com incerteza multi-estágio. Baseados na tranformação de Knuth, nós geramos a árvore de cenários considerando a representação filho-esqueda, irmão-direita o que torna a simulação mais eficiente em termos de tempo e de número de cenários. Nós também formalizamos uma reformulação do modelo de administração de ativos e passivos baseada na abordagem extensiva implícita para o modelo de otimização. Essa técnica é projetada pela definição de um processo de filtragem com “bundles”; e codifciada com o auxílio de uma linguagem de modelagem algébrica. A eficiência dessa metodologia é testada em um modelo de administração de ativos e passivos com incerteza com restrições probabilísticas conjuntas. Nosso framework torna possível encontrar a solução ótima para árvores com um número razoável de cenários. / Uncertainty is a key element of reality. Thus, it becomes natural that the search for methods allows us to represent the unknown in mathematical terms. These problems originate a large class of probabilistic programs recognized as stochastic programming models. They are more realistic than deterministic ones, and their aim is to incorporate uncertainty into their definitions. This dissertation approaches the probabilistic problem class of multistage stochastic problems with chance constraints and joint-chance constraints. Initially, we propose a multistage stochastic asset liability management (ALM) model for a Brazilian pension fund industry. Our model is formalized in compliance with the Brazilian laws and policies. Next, given the relevance of the input parameters for these optimization models, we turn our attention to different sampling models, which compose the discretization process of these stochastic models. We check how these different sampling methodologies impact on the final solution and the portfolio allocation, outlining good options for ALM models. Finally, we propose a framework for the scenario-tree generation and optimization of multistage stochastic programming problems. Relying on the Knuth transform, we generate the scenario trees, taking advantage of the left-child, right-sibling representation, which makes the simulation more efficient in terms of time and the number of scenarios. We also formalize an ALM model reformulation based on implicit extensive form for the optimization model. This technique is designed by the definition of a filtration process with bundles, and coded with the support of an algebraic modeling language. The efficiency of this methodology is tested in a multistage stochastic ALM model with joint-chance constraints. Our framework makes it possible to reach the optimal solution for trees with a reasonable number of scenarios.