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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. ISSN 2227-9091 (In Press)

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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
Additional Information: © 219 The Authors
Divisions: Statistics
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Date Deposited: 10 Oct 2019 12:06
Last Modified: 04 Dec 2019 00:24
URI: http://eprints.lse.ac.uk/id/eprint/102043

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