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Marco Corazza Claudio Pizzi MathematicalandStatisticalMethodsforActuarialSciencesandFinance Marco Corazza (Editor) Claudio Pizzi (Editor) Mathematical and Statistical Methods for Actuarial Sciences and Finance MarcoCorazza ClaudioPizzi DepartmentofAppliedMathematics DepartmentofStatistics UniversityCa’Foscari Venice UniversityCa’Foscari Venice Venice,Italy Venice,Italy ISBN978-88-470-1480-0 e-ISBN978-88-470-1481-7 DOI10.1007/978-88-470-1481-7 LibraryofCongressControlNumber:2009939620 SpringerDordrechtHeidelbergLondonMilanNewYork ©Springer-VerlagItalia2010 Thisworkissubjecttocopyright.Allrightsarereserved,whetherthewholeorpartofthematerial isconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation,broad- casting,reproduction onmicrofilmsorinotherways,andstorageindatabanks.Duplicationofthis publicationorpartsthereofispermittedonlyundertheprovisionsoftheItalianCopyrightLawinits currentversion,andpermissionforusemustalwaysbaobtainedfromSpringer.Violationsareliable toprosecutionundertheItalianCopyrightLaw. Theuseofgeneraldescriptivenames,registerednames,trademarks,etc.inthispublicationdoesnot imply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. 987654321 Cover-Design:SimonaColombo,Milan TypesettingwithLATEX:PTP-Berlin,ProtagoTEX-ProductionGmbH,Germany(www.ptp-berlin.eu) PrintingandBinding: Signum, Bollate (MI) PrintedinItaly Springer-VerlagItaliasrl–ViaDecembrio28–20137Milano SpringerisapartofSpringerScience+BusinessMedia(www.springer.com) Preface This volume collects a selection of refereed papers of the more than one hundred presentedattheInternationalConferenceMAF2008–MathematicalandStatistical MethodsforActuarialSciencesandFinance. The conference was organisedby theDepartment of AppliedMathematics and theDepartmentofStatisticsoftheUniversityCa’FoscariVenice(Italy),withthecol- laborationoftheDepartmentofEconomicsandStatisticalSciencesoftheUniversity ofSalerno(Italy).ItwasheldinVenice,fromMarch26to28,2008,attheprestigious CavalliFranchettipalace,alongGrandCanal,oftheIstitutoVenetodiScienze,Lettere edArti. This conference was the first international editionof a biennial national series begunin2004,whichwasbornofthebrilliantbeliefofthecolleagues–andfriends– oftheDepartmentofEconomicsandStatisticalSciencesoftheUniversityofSalerno: theidea followingwhichthecooperationbetween mathematicians and statisticians inworkinginactuarialsciences,ininsuranceandinfinancecanimproveresearchon these topics.The proofofthisconsistsinthe wideparticipationinthese events. In particular,withreferencetothe2008internationaledition: – Morethan150attendants,bothacademiciansandpractitioners; – Morethan100acceptedcommunications,organisedin26parallelsessions,from authorscomingfromabouttwentycountries(namely:Canada,Colombia,Czech Republic,France,Germany,GreatBritain,Greece,Hungary,Ireland,Israel,Italy, Japan,Poland,Spain,Sweden,Switzerland,Taiwan,USA); – twoplenaryguest-organisedsessions;and – aprestigiouskeynotelecturedeliveredbyProfessorWolfgangHa¨rdleoftheHum- boldtUniversityofBerlin(Germany). Thepaperspublishedinthisvolumecoverawidevarietyofsubjects:actuarialmod- els; ARCH and GARCH modelling;artificial neural networks in finance; copulæ; corporate finance; demographic risk; energy markets; insurance and reinsurance; interest rate risk; longevity risk; Monte Carlo approaches; mutual fund analysis; non-parametrictesting;optionpricingmodels;ordinalmodels;probabilitydistribu- tionsandstochasticprocessesinfinance;riskmeasures;robustestimationinfinance; VI Preface solvency analysis; static and dynamic portfoliomanagement; time series analysis; volatilitytermstructure;andtradingsystems. Ofcourse,thefavourableoutcomeofthisconferencewouldnothavebeenpossible without the precious help of our sponsors (in alphabetical order): Banca d’Italia; Casino` Municipale di Venezia; Cassa di Risparmio di Venezia; Istituto Veneto di Scienze, Lettere ed Arti; Provincia diVenezia; and VENIS – Venezia Informaticae Sistemi.Wetrulythankthemall. Moreover,wealsoexpressourgratitudetothemembersoftheScientificandthe OrganisingCommittees,andtoallthepeoplewhosecollaborationcontributedtothe successoftheMAF2008conference. Finally, we would like to report that the organization of the next conference has already begun: the MAF 2010 conference will be held in Ravello (Italy), on the Amalfitan Coast, from April 7 to 9, 2010 (for more details visit the website http://maf2010.unisa.it/).Weanticipateyourattendance. Venezia,August2009 MarcoCorazzaandClaudioPizzi Contents ImpactofinterestrateriskontheSpanishbankingsector LauraBallester,RomańFerrer, andCristo´balGonza´lez................... 1 Trackingerrorwithminimumguaranteeconstraints DianaBarroandElioCanestrelli..................................... 13 Energymarkets:crucialrelationshipbetweenprices CristinaBencivenga,GiuliaSargenti,andRitaL.D’Ecclesia .............. 23 Temperedstabledistributionsandprocessesinfinance: numericalanalysis MicheleLeonardoBianchi,SvetlozarT.Rachev, YoungShinKim, andFrankJ.Fabozzi............................................... 33 Transformationkernelestimationofinsuranceclaimcostdistributions CatalinaBolance´,MontserratGuilleń,andJensPerchNielsen ............. 43 Whatdodistortionriskmeasures tellus onexcess oflossreinsurance withreinstatements? AntonellaCampanaandPaolaFerretti ................................ 53 Someclassesofmultivariateriskmeasures MartaCardinandElisaPagani ...................................... 63 Assessingriskperceptionbymeansofordinalmodels PaolaCerchiello,MariaIannario,andDomenicoPiccolo ................. 75 Afinancialanalysisofsurplusdynamicsfordeferred lifeschemes RosaCocozza,EmiliaDiLorenzo,AlbinaOrlando,andMarilenaSibillo..... 85 CheckingfinancialmarketsviaBenford’slaw:theS&P500case MarcoCorazza,AndreaElleroandAlbertoZorzi ........................ 93 VIII Contents EmpiricallikelihoodbasednonparametrictestingforCAPM PietroCorettoandMariaLuciaParrella............................... 103 Lee-Carter error matrixsimulation:heteroschedasticity impact on actuarialvaluations ValeriaD’AmatoandMariaRussolillo ................................ 113 Estimatingthevolatilitytermstructure AntonioD´ıaz,FranciscoJarenõ,andEliseoNavarro ..................... 123 Exact and approximated option pricing in a stochastic volatility jump-diffusionmodel FernandaD’Ippoliti,EnricoMoretto,SaraPasquali,andBarbaraTrivellato.. 133 AskewedGARCH-typemodelformultivariatefinancialtimeseries CinziaFranceschiniandNicolaLoperfido.............................. 143 Financialtimeseriesandneuralnetworksinaminoritygamecontext LucaGrilli,MassimoAlfonsoRusso,andAngeloSfrecola ................. 153 Robustestimationofstyleanalysiscoefficients MicheleLaRoccaandDomenicoVistocco ............................. 163 Managingdemographicriskinenhancedpensions SusannaLevantesiandMassimilianoMenzietti.......................... 173 Clusteringmutualfundsbyreturnandrisklevels FrancescoLisiandEdoardoOtranto.................................. 183 MultivariateVarianceGammaandGaussiandependence: astudywithcopulas ElisaLucianoandPatriziaSemeraro.................................. 193 A simple dimension reduction procedure for corporate finance compositeindicators MarcoMarozziandLuigiSantamaria ................................. 205 Therelationbetween impliedandrealisedvolatilityintheDAXindex optionsmarket SilviaMuzzioli ................................................... 215 Binomialalgorithmsfortheevaluationofoptionsonstockswithfixedper sharedividends MartinaNardonandPaoloPianca ................................... 225 Nonparametricpredictionintimeseriesanalysis:someempiricalresults MarcellaNiglioandCiraPerna...................................... 235 Contents IX Onefficient optimisationoftheCVaRandrelatedLPcomputablerisk measuresforportfolioselection WłodzimierzOgryczakandTomaszS´liwin´ski ........................... 245 Apatternrecognitionalgorithmforoptimalprofitsincurrencytrading DaniloPelusi..................................................... 253 Nonlinearcointegrationinfinancialtimeseries ClaudioPizzi..................................................... 263 Optimaldynamicassetallocationinanon–Gaussianworld GianniPola...................................................... 273 Faircostsofguaranteedminimumdeathbenefitcontracts FrançoisQuittard-PinonandRivoRandrianarivony...................... 283 Solvencyevaluationoftheguarantyfundatalargefinancialcooperative JeanRoy ........................................................ 295 A Monte Carlo approach to valueexchange options using a single stochasticfactor GiovanniVillani .................................................. 305