Publication
The replicating portfolio (RP) approach to the calculation of capital for life insurance portfolios is an industry standard. The RP is obtained from projecting the terminal loss of discounted asset–liability cash flows on a set of factors generated by a family of financial instruments that can be efficiently simulated. We provide the mathematical foundations and a novel dynamic and path-dependent RP approach for real-world and risk-neutral sampling. We show that our RP approach yields asymptotically consistent capital estimators if the chaotic representation property holds. We illustrate the tractability of the RP approach by three numerical examples.
Marcos Rubinstein, Farhad Rachidi-Haeri, Elias Per Joachim Le Boudec, Chaouki Kasmi, Nicolas Mora Parra, Emanuela Radici
Annalisa Buffa, Espen Sande, Yannis Dirk Voet
Mario Paolone, André Hodder, Lucien André Félicien Pierrejean, Simone Rametti