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On the cost-of-capital rate under incomplete market valuation

On the cost-of-capital rate under incomplete market valuation
Recurso electrónico / Electronic resource
MAP20220034197
On the cost-of-capital rate under incomplete market valuation / Hansjörg Albrecher...[et.al.]
Sumario: In this paper we discuss the concept of the cost-of-capital (CoC) rate for an insurance company as an equilibrium in the economic triangle of policyholders, shareholders, and the regulator. This provides a possible rationalization and an economic foundation for a quantity that is widely used in practice but whose value is typically neither technically nor economically well justified. We show how it can be well founded in such a triangular equilibrium. Under a simple one-period model and a valuation procedure of a two-price economy for illiquid assets we provide a corresponding economic-theoretical quantification for the CoC rate. The resulting rates are illustrated by a number of concrete numerical examples.

La copia digital se distribuye bajo licencia "Attribution 3.0 International (CC BY NC ND 3.0 )". - https://creativecommons.org/licenses/by-nc-nd/3.0/
En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 05/12/2022 Volumen 89 Número 4 - diciembre 2022 , p. 1139-1158
1. Empresas de seguros . 2. Tasas .