Professor Karl Schmedders, University of Zurich

Replicating portfolios have emerged as an important tool in the life insurance industry, used for the valuation of companies’ liabilities. This paper describes the replicating portfolio (RP) model for approximating life insurance liabilities in place in a large global insurance company. We describe the challenges presented by the latest solvency regimes in Europe and how the RP model enables this company to comply with the Swiss Solvency Test. The model minimises the L1 error between the discounted life insurance liability cash flows and the discounted RP cash flows over a multi-period time horizon for a broad range of different future economic scenarios. A numerical application of the RP model to empirical data sets demonstrates that the model delivers RPs that match the liabilities and perform well for economic capital calculations.

Speaker bio

Karl Schmedders has been a Professor of Quantitative Business Administration in the Faculty of Business, Economics, and Informatics at the University in Zurich since 2008. In addition, he is a Visiting Professor of Executive Education at the Kellogg School of Management, Northwestern University in Evanston, USA.

Karl received a PhD in operations research from Stanford University in 1996. After a two-year post-doc at the Hoover Institution, a thinktank on the Stanford campus, he became an assistant professor of managerial economics and decision sciences at the Kellogg School of Management, Northwestern University. He was promoted to associate professor in 2001 and received tenure at Kellogg in 2005. He continued to work at Kellogg until his departure to Zurich.

His research focuses on computational economics and finance. He applies numerical solution techniques to complex economic and financial models shedding light on relevant practical problems. He has published numerous research articles in international academic journals such as Econometrica, The Review of Economic Studies, The Journal of Finance, and The Review of Financial Studies, among others.

Address

Trumpington St
Cambridge
CambridgeshireCB2 1AG
United Kingdom

Date & time

Date: 16 January 2018
Start Time: 13:00
End Time: 14:00

Audience

Open to: Members of the University of Cambridge

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Event location


Trumpington St
Cambridge
CambridgeshireCB2 1AG
United Kingdom

Event timings

Date: 16 January 2018
Start Time: 13:00
End Time: 14:00