Dynamic valuation of stochastic cash flows

This project aims to develop new mathematical theory and efficient computational and statistical methodology for challenging problems that lie in the intersection of finance and insurance.

Recent developments in insurance regulation require valuation and risk management approaches that are fully consistent with approaches that originates from financial mathematics and mathematical economics.

However, insurance liability cash flows have characteristics that make straightforward use of traditional methodology from financial mathematics inappropriate.

Moreover, traditional methodology from insurance mathematics disregard the presence of financial market risks in insurance liability cash flows that stem from e.g. products with financial components in pension and life-insurance.The main challenges when attempting to apply methodology from financial mathematics stem from that insurance liability cash flows are often very long, only partially hedgable and subject to externally imposed repeated forward-looking capital requirements.

Therefore, new mathematical theory and new computational methods need to be developed.

On the other hand there is an enormous potential for successful solutions to these problems being adopted and widely used in real-life decision making throughout the insurance industry.