Journal of Insurance and Finance 2021 KCI Impact Factor : 0.67

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pISSN : 2384-3209
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2014, Vol.25, No.1

  • 1.

    Estimating the Effects of Improving a Key Features Document of Variable Life Insurance

    황진태 , Hae Won Byun , 김해식 | 2014, 25(1) | pp.3~27 | number of Cited : 5
    Abstract PDF
    In this paper, we demonstrate that more consumer-friendly manuals are likely to help consumers better understand insurance products. In a social experiment, two groups of participants read two different versions of insurance manuals – the current version and the consumer-friendlily revised version - for a variable annuity product, which was followed by the assessment of their understanding of the product. Together with the OLS and the propensity score matching estimation, our results suggest that, in terms of the four questions where the two groups differed significantly, the percentage of correct answers from our consumer-friendly manual group is, on average, 18-23 percentage points higher than that from the current manual group.
  • 2.

    Reverse Mortgage Loan to Hedge Longevity Risk-Comparison with Immediate Life Annuities-

    Yang Jaehwan , Yoonkyung Yuh , 김혜경 | 2014, 25(1) | pp.29~73 | number of Cited : 9
    Abstract PDF
    This paper analyzed the financial and the utility values of the reverse mortgage loan by comparing them with those of the immediate life annuities. The financial value was measured by MW ratio, and the utility value was estimated by RMEA, which is similar to the widely used AEW. First, the results from the financial analysis indicate that, if the value of the reverse mortgage loan consists of the residential value and the annuity value, then the residential value is considerably high in the reverse mortgage loan. The MW ratio varies among the house ownership types, but the MW ratio of the monthly rent type is over 1, and MW ratio of the residential value is higher than MW ratio of the annuity value in the monthly rent type. Regarding utility-based analysis, if the residential cost is ignored, then the immediate life annuity is favorable compared to the reverse mortgage loan. However, if the housing cost is assumed to be 30% of the current value of the house, then the reverse mortgage loan starts becoming a better choice than the immediate life annuity depending on the house value, financial asset, and payout types. Moreover, if the housing cost is assumed to be 50% of the current value of the house, then the reverse mortgage loan becomes a better option than the immediate life annuity for all considered cases. These findings imply that the residential value of the reverse mortgage loan has considerable benefits in lowering the longevity risk, especially for groups who expect certain housing costs.
  • 3.

    A Study on Natural Hedging Effect to the Risk of Portfolio in Equity-Indexed Annuity and Minimum Guarantees of Variable Annuity

    송창길 , Chang Soo Lee , Hur Yeon | 2014, 25(1) | pp.75~107 | number of Cited : 2
    Abstract PDF
    Since its introduction to Korean market in 2002, variable annuity has recorded fast growth and has become one of the typical annuity products. However, there is a need for more expert knowledge and research on the risk management of the guaranteed minimum option that characterizes variable annuity compared to competing financial products. In this study, we suggest using equity-indexed annuity as a risk management tool for the guaranteed minimum option of variable annuity, because Ratchet option of the equity indexed annuity provides a natural hedging effect to the GMAB option of the variable annuity. Specifically, simultaneous sales of equity-indexed annuity and variable annuity products can bring a natural hedging effect to the whole portfolio. As a result of this natural hedging effect, required amount of reserves and capital can be reduced. In addition, this study shows that insurers can save costs of dynamic hedging and consequently improve profitability using this kind of portfolio.
  • 4.

    An Empirical Analysis of the International Asset Pricing Model

    Soonho Kim | 2014, 25(1) | pp.109~139 | number of Cited : 0
    Abstract PDF
    This paper examines global integration and/or co-movement and identifies a number of risk factors in the international stock market by using factor analysis. Based on the identified number of risk factors, the related economic fundamentals of global risk factors are studied. The global integration phenomenon is evident and is increasing gradually. Since 2000, the global risk factors have accounted for up to 78% of each stock market variation. In this study, the method of Bai and Ng (2002) and a new methodology proposed in this study are applied to uncover a number of risk factors. Based on the latter method, three risk factors are identified. The first risk factor is the global market factor. The second and third risk factors are related to macro-variables of global real economy and global financial market. The null hypothesis that the pricing error measured by Hansen-Jagannathan Distance is zero cannot be rejected when tradable risk factors are constructed using tracking portfolios with proper base assets.