This paper analyzes how first premiums in variable annuities and universal products respond to shocks to macroeconomic variables as well as each of their own variables. Then it decomposes the variance of their forecast errors caused by shocks given exogenously to the variables.
Our end results in the paper are that following a temporary positive response, the first premiums in both variable annuities and universal continue to respond negatively to a shock to the interest rate, the so-called Korea's 5-year government bond yield, whereas they show a permanent positive response to the Korea Composite Stock Price Index (KOSPI). In addition, it follows that the first premiums in variable annuities shows a positive response to a shock to the unemployment rate, while those in variable universal does a negative response. The variance of forecast errors in variable annuities is greatly caused by a shock to the KOSPI and the interest rate. In contrast, the variance of forecast errors in variable universal is largely led to by a shock to the unemployment rate.
It is expected to reinforce the activity for preventing industrial accidents to evaluate employer's efforts to avert occupational diseases and to reflect it adequately in calculating the premium of workers' compensation insurance. It can also contribute to enhancing equity of the firms which participate in financing workers' compensation insurance. The purpose of this paper is to reduce those work-related accidents by comparing methods of calculating workers' compensation insurance premium in Korea and Germany and making some suggestions for reinforcing employers' efforts to prevent industrial accidents. This paper suggests that the balance rate in Experience Rating System should be based on the expenses related with new industrial accidents within the reference period.
There are secondary life insurance markets where a policyholder can sell her insurance policy to her insurance company or a third party. The paper focuses on the trade between a policyholder in the life insurance market and a third party who is an investor in the capital market. The trade is called a life settlement.
Theoretically, life settlements are expected to raise the level of social welfare. In practice, it is shown that both policyholders and investors can earn more profits in life settlements than otherwise they could earn; as a result, life settlements have grown well in the U.S. There are two types of life settlements: viatical settlements for terminally ill insureds and senior settlements for impaired insureds who are 65years old or more. In the U.S., the latter is booming while the former has disappeared as its alternatives such as advanced death payments are provided by insurers.
In the Korean insurance market, life settlements could be available with an insurer's consent. However, it is not guaranteed that Korean life settlements can grow well even though they are legally possible. It is because the economic availability of life settlements depend on the level of mortality of the insured. The paper tests the economic viability of life settlements in Korean insurance market.
Based on whole life critical illness insurance data and national statistics on cancer, our cash flow simulation results indicate that only viatical settlements can be viable in some cases while senior settlements are not in Korean insurance market. Given that Korean life insurers are also providing alternatives to life settlements which has smothered viatical settlements in the U.S., our results suggest that life settlements are not expected to grow well in Korea.
The purpose of this study is to consider how the allocation of burden of proof and the accountability impact on the financial firm and consumers behavior through the game theoretic approach. Main results are as follows.
First, there are two types of equilibrium in the model. The first type of the equilibrium realizes when the ratio of the good-type financial products is relatively high. In this equilibrium, the firm never chooses truth telling when it sells bad-type product but the consumer always purchases the product regardless of the firm's announcement. The second type of the equilibrium realizes when the ratio of goodtype product is relatively low. In this equilibrium, the firm randomly chooses truth telling when it sells bad-type product and the consumer also randomly chooses whether she purchases the product. Second, in case a burden of proof is on the consumer, the probability of the firm's truth telling is the highest. It was followed by the case where the burden of proof is allocated by the principle of suitability.
Third, regardless of the allocation of the burden of proof, the same equilibrium realizes when the consumer has only to prove the probability of firm's false telling.
Fourth, it is not desirable for the firm to bear a greater burden of proof because it lowers the probability of truth telling. This is not consistent with the general opinion that the financial firms should bear a greater burden of proof to protect the consumers.
In this paper, by using utility-based measurements, we evaluate the life annuity plans for Korean pre-retired couples participating in the Korea National Pension (KNP). We examine the utility value of life annuity and its specific pattern by major factors such as income, assets, risk aversion, and bequest motives of the couples. For the utility measure, an optimization model is formulated with the objective of maximizing utility on consumption and Dynamic Programming (DP)technique is used to solve the problem.
This study provides several important findings regarding the annuity planning strategy for the pre-retired couples participating in the KNP. First, we confirm that private life annuity is an effective tool to improve the couples utility value when they are expecting retirement income from national pension. Second, the results indicate that utility value of life annuity is particularly higher for couples with higher net worth, lower bequest motives, and higher risk aversion levels. Third, we find that optimal rate of annuitization among retirement wealth is consistently decreased when they delay the timing of annuitization. Finally, insurance fee decreases the couples’utility value significantly. These findings have implications for developing the optimal strategies of life annuity in addition to the national pension income.
Price limit system is used to increase stability of stock markets. But, this system causes side effects of restricting the efficiency and liquidity of the market as pricediscovery process is delayed. Especially, when closing prices are at the limits, price limits cause positive serial correlation in the daily stock return series, and hence efficient market hypothesis(EMH) is not accepted partially. Using a comprehensive dataset of Korea Exchange(KRX), this study investigates the performance of the momentum strategy around closing based upon events of limit prices. We devide events into limited day and no-limited day, and examine the momentum strategy.
The empirical results show that only the market adjusted returns at the limited day are positive and statistically significant. We also examine Sharpe-ratio to evaluate risk-adjusted performance of the strategy, and observe that the performance of upper-limited events meaningfully dominate that of lower-limited events. This informs that this momentum strategy can provide positive-return which is independent with average market return, because price limits are affected by not only market common factors but also industry or individual firm-specific factors.
Our empirical results support the delayed-price discovery hypothesis, which imply that the persistent excessive returns could exist through applying the strategy based on the predictability from the delayed price discovery by price limits.