[10] Alternative Risk Funding Solutions for Financial Risk - Part I

By Harry Niederau | June 4, 2009

In this post we continue the discussion launched in previous posts, i.e. [3] and [9], highlighting the limitations of diversification in the sense of Makrowitz but also those of employing derivative instruments (e.g. Put options) as stop loss type of insurance when stock markets contract. We stress that the balance sheets of organisations with a business related overhead in fixed asset positions, such as life (re-)insurers or pension funds, are affected most by the latter limitations. This sets the stage for discussing possible alternative solutions in the following posts.

Topics: pricing in insurance | | Comments