Jul 2026· Journal of Risk and Insurance· 0 citations· 47 references
Abstract
This study investigates the valuation gap between buyers and sellers of insurers' contingent capital, driven by asymmetric exposures to tax benefits, capital injections, and bankruptcy costs. We develop a novel Twin‐Tree Model with Jumps (
TTMJ
) that models the insurer's asset value dynamics by incorporating catastrophe risk, insolvency risk, and contractual features observed in practice. Using U.S. earthquake loss data and a representative real‐world contract, we show that early exercise and net‐worth provisions significantly affect contract tradability by expanding the range of mutually acceptable prices. Our results provide new insights into reconciling valuation asymmetries and offer guidance for designing contingent capital instruments that enhance insurers' financial resilience under catastrophe risk.
Rising interest rates can expose life insurers to surrender risk by reducing the market value of their assets and raising policyholders'outside returns. This paper develops a minimal model of an insurance-specific run mechanism in which strategic interaction arises because early surrenders can deplete the asset pool ba...
We propose a novel valuation framework for contingent convertible (CoCo) bonds based on the issuing bank's Common Equity Tier 1 (CET1) ratio, which is widely acknowledged as an indicator of a bank's solvency. Our approach develops a bivariate jump-diffusion model that captures the dynamic relationship linking the CET1...
States and localities are relied upon to implement macroeconomic stabilization policies and ensure service delivery in times of crisis. In April 2020, the introduction of the Municipal Liquidity Facility (MLF) added an emergency lending instrument to the policy arsenal, guaranteeing liquidity, but at a price. Using a r...
Andrew F. Haughwout, Benjamin Hyman, Or Shachar· American Economic Journal: E...· 1 citation
We examine how government subsidies alter corporate control activity in publicly traded U.S. firms. Using a panel from 2000–2022 that links Good Jobs First subsidy records with Bloomberg merger and acquisition (M&A) data, we find that subsidies increase firms’ likelihood of becoming acquirers while reducing their pro...
Adam Hanan, José Antonio Pérez‐Amuedo, M. Hassan et al.· Journal of Financial Researc...· 0 citations
Mutual funds (MFs) and other open-ended collective investment funds engage in liquidity transformation—they offer investors daily redemptions while investing in assets that may take longer than a day to sell without significant price impact. This activity is particularly salient for corporate debt funds, where large in...
Kenechukwu Anadu, Sean Baker, Fang Cai et al.· FEDS Notes· 0 citations
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