Actuarial Sciences and Quantitative Finance: ICASQF, Bogotá, Colombia, June 2014

107 Pages·2015·2.298 MB·English

by  Jaime A. Londoño, José Garrido, Daniel Hernández-Hernández (eds.)

Springer Proceedings in Mathematics & Statistics
Jaime A. Londoño
José Garrido
Daniel Hernández-Hernández E ditors
Actuarial
Sciences and
Quantitative
Finance
ICASQF, Bogotá, Colombia, June 2014
Springer Proceedings in Mathematics & Statistics
Volume 135
Moreinformationaboutthisseriesathttp://www.springer.com/series/10533
Springer Proceedings in Mathematics & Statistics
Thisbookseriesfeaturesvolumescomposedofselectcontributionsfromworkshops
and conferences in all areas of current research in mathematics and statistics,
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well-edited, authoritative reports on developments in the most exciting areas of
mathematicalandstatisticalresearchtoday.
Jaime A. Londoño • José Garrido
Daniel Hernández-Hernández
Editors
Actuarial Sciences
and Quantitative Finance
ICASQF, Bogotá, Colombia, June 2014
123
Editors
JaimeA.Londoño JoséGarrido
DepartmentofMathematics&Statistics DepartmentofMathematicsandStatistics
NationalUniversityofColombia ConcordiaUniversity
Manizales,Colombia Montréal,Québec,Canada
DanielHernández-Hernández
MathematicsResearchCenter(CIMAT)
Guanajuato,Mexico
ISSN2194-1009 ISSN2194-1017 (electronic)
SpringerProceedingsinMathematics&Statistics
ISBN978-3-319-18238-4 ISBN978-3-319-18239-1 (eBook)
DOI10.1007/978-3-319-18239-1
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Preface
The chapters in this volume of the Springer Proceedings in Mathematics &
Statistics titled “Advances in Actuarial Sciences and Quantitative Finance” from
the proceedings of the First International Congress on Actuarial Science and
Quantitative Finance, which took place in Bogotá from June 17 to 20, 2014. The
conference was organized by the Department of Mathematics of the Universidad
NacionaldeColombiawiththesupportofotheracademicinstitutionsthatinclude
UniversidadAntonioNariño,UniversidadExternadodeColombiaandUniversidad
delRosario.AdditionalsponsorsincludeCOLCIENCIAS,ICETEX,Fasecoldaand
Asociación Colombiana de Actuarios. The conference took place in the Centro
CulturalGabrielGarciaMarquezandBibliotecaLuisÁngelArango.Thescientific
committeeconsistedofProf.SamuelCox(UniversityofManitoba,Canada),Prof.
José Garrido (Concordia University, Canada), Prof. Daniel Hernández-Hernández
(CIMAT, Mexico), Prof. Jaime Londoño(UniversidadNacional, Colombia), Prof.
JavierPeña(CarnegieMellonUniversity,USA),Prof.Jean-LucPrigent(Université
de Cergy-Pontoise, France) and Prof. Armando Zarruk (Universidad Nacional,
Colombia).
Thiswasthefirst editionofa seriesofeventstobeorganizedeveryotheryear,
whose objective is to become a reference in Actuarial Science and Quantitative
Finance in Colombia, the Andean region (Peru, Colombia, Venezuela, Ecuador,
and Bolivia) and the Caribbean, with participation from researchers, students
and practitioners from different parts of the world. This first edition contributed
to enhancing the relations between the academic and industrial actuarial and
financialcommunitiesofColombiaandtheAndeanRegionwiththecorresponding
communitiesinNorthAmerica,Europeandotherpartsoftheworld.
v
vi Preface
TheemphasisoftheeventwasequallydistributedbetweenActuarialScienceand
QuantitativeFinanceandcoveredavarietyoftopicssuchasStatisticalTechniques
in Finance and Actuarial Science, Portfolio Management, Derivative Valuation,
Risk Theory and Life and Pension Insurance Mathematics, Non-Life Insurance
Mathematics,andEconomicsofInsurance.
The event consisted of plenary sessions with invited speakers in the areas of
Actuarial Science and Quantitative Finance, oral sessions of contributed talks on
these topics, as well as poster sessions and short courses taught by some of
the invited speakers. The list of invited speakers reflects the broad variety of
topics:MoniqueJeanblanc(ArbitragesinaProgressiveEnlargementofFiltrations),
Stephane Loisel (From Ruin Theory to Longevity Risk), Hansjoerg Albrecher
(InsuranceRisk,BankruptcyandtheCostofCapital),SteveHaberman(Longevity
RiskandLongevityTrends),AjaySubramanian(DynamicPrudentialRegulation),
FabioMercurio(DerivativePricingUnderCollateralizationandDifferentialRates),
David Ingram (Culture and its Impact on Risk Management of an Insurance
Enterprise), Richard Davis (Noncausal Vector AR Processes with Application to
Economic Time Series), Edward (Jed) Frees (Insurance CompanyOperations and
DependenceModeling)andCarlosVazquezCendón(SpeedupofCalibrationand
Pricing with SABR Models: From Equities to Interest Rates Derivatives). Topics
for short courses included: Heavy-tailed Time Series: Theory and Applications
(Richard Davis), Regression Modelling with Actuarial Applications (Edward W.
Frees), Modelling Credit Risk Events (Monique Jeanblanc) and Enterprise Risk
ManagementforInsuranceCompanies(StephaneLoisel).
Additionally, contributions from researchers and students were presented in
oral and poster sessions. There were 37 oral presentations from 56 submitted
contributions,andthreeposterpresentationsoutof6submittedpostercontributions.
Speakers came from a diverse list of countries that included Argentina, Brazil,
Canada, Colombia, Costa Rica, France, Ireland, Mexico, Netherlands, Taiwan,
USA, Spain, Switzerland, UK and Venezuela. The number of contributionsalong
withatotalnumberof249registeredparticipantsoutnumberedourexpectationsfor
thefirsteditionofthisevent.
TheCongressgaveanemphasisontherelationbetweenindustryandacademia
providing a day to address problems arising from the financial and insurance
industries. As a matter of fact, topics of talks, and in some cases the speakers
themselves came from those industries. The space provided to practitioners a
platform to presentand discuss with academics and students differentapproaches
toaddressingproblemsarisingfromtheindustriesintheregion.
The current proceedingsare based on invitations to selected oral contributions
andselectedcontributionspresentedbytheinvitedspeakers.Allcontributionswere
subjecttoareviewprocess.Thespectrumofthefivepaperspublishedherereflects
thediversenatureofthepresentations.Wearegratefultotheauthorswhosubmitted
papersforthisvolumeaswellastothereviewersfortheirexpertise.
Special thanks go to the members of the Organizing Committee, which
included Prof. Carlos Alberto Castro (Universidad del Rosario, Bogotá), Prof.
Johanna Garzón (Universidad Nacional de Colombia, Bogotá), Prof. Jaime
Preface vii
Londoño (Universidad Nacional de Colombia, Bogotá), Prof. Victor Hugo Prieto
(Universidad Antonio Nariño, Bogotá), Prof. Alejandra Sánchez (Universidad
NacionaldeColombia,Bogotá)andProf.JavierSandoval(UniversidadExternado
de Colombia, Bogotá). Finally, we would like to thank all the conference
participantswhomadethiseventagreatsuccess.
Montréal,QC,Canada JoséGarrido
Guanajuato,Mexico DanielHernández-Hernández
Manizales,Colombia JaimeA.Londoño

Contents
ModelingElectricitySpotPriceDynamicsbyUsingLévy-Type
CoxProcesses:AnApplicationtoColombianMarket........................ 1
ViswanathanArunachalamandRodrigoCancino
Using Value-at-Risk (VaR) to Measure Market Risk
oftheEquityInventoryofaMarketMaker.................................... 15
ArgynKuketayevandJamesBeatty
ReverseMortgageSchemesFinancingUrbanDynamicsUsing
theMultipleDecrementApproach.............................................. 27
DavidBogataj,DiegoRosMcDonnell,andMarijaBogataj
Speedup of Calibrationand Pricing with SABR Models:
FromEquitiestoInterestRatesDerivatives ................................... 49
AnaMaríaFerreiro,JoséA.García-Rodríguez,
JoséG.López-Salas,andCarlosVázquez
Bergman,Piterbarg,andBeyond:PricingDerivativesUnder
CollateralizationandDifferentialRates........................................ 65
FabioMercurio
Index................................................................................ 97
ix