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A generalised CIR process with externally-exciting and self-exciting jumps and its applications in insurance and finance

Dassios, Angelos, Jang, Jiwook and Zhao, Hongbiao (2019) A generalised CIR process with externally-exciting and self-exciting jumps and its applications in insurance and finance. Risks, 7 (4). ISSN 2227-9091

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Identification Number: 10.3390/risks7040103

Abstract

In this paper, we study a generalised CIR process with externally-exciting and self-exciting jumps, and focus on the distributional properties and applications of this process and its aggregated process. The aim of the paper is to introduce a more general process that includes many models in the literature with self-exciting and external-exciting jumps. The first and second moments of this jump-diffusion process are used to calculate the insurance premium based on mean-variance principle. The Laplace transform of aggregated process is derived, and this leads to an application for pricing default-free bonds which could capture the impacts of both exogenous and endogenous shocks. Illustrative numerical examples and comparisons with other models are also provided.

Item Type: Article
Official URL: https://www.mdpi.com/journal/risks
Additional Information: © 2019 The Authors
Divisions: Statistics
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods
Date Deposited: 10 Oct 2019 12:06
Last Modified: 20 Jun 2020 02:53
URI: http://eprints.lse.ac.uk/id/eprint/102043

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