Corporate Finance Commons^™

Does Beating Cash Flow Benchmarks Reduce The Cost Of Debt?, Mauricio A. Melgarejo

Scholarship and Professional Work - Business

This paper examines whether beating previous year cash flow values and analysts' cash flow forecasts impact the firms' cost of debt. Creditors are expected to be more concerned about firm solvency than firm profitability. Accordingly, if lenders have any reference point it may be related to cash flow numbers. This study finds that firms that beat analysts' cash flow forecasts have smaller initial bond yield spreads in the next period and a decrease in their initial bond yield spreads between consecutive periods. This effect is more pronounced at short maturities and for observations with less informative earnings. Firms with lower …

Women In The Workforce: An In-Depth Analysis Of Gender Roles And Compensation Inequity In The Modern Workplace, Rebecca L. Ziman

Honors Theses and Capstones

This paper explores the increase in participation and education of American women in the workforce with a special focus on women in business and accounting roles. The paper then goes on to discuss the wage gap between genders, how to remedy inequality in the workplace, and highlights several reasons why pursing a solution to gender inequality is beneficial for both the employee and the company.

Underwriting Syndicates In Bric Countries: Determinants Of Syndicate Size And Member Selection

Fordham Business Student Research Journal

The process of startup firms raising capital through equity markets by issuing shares to the public is a strong sign of financial growth and innovation. Going public requires the issuing firm to share information with potential investors and requires financial institutions to underwrite the effort, typically through a syndicate. The underwriting syndicate is a coalition of competing banks that serve as intermediaries between the firm and the investors. In emerging nations, this process is compounded by the differences in the maturity of the financial markets and the economic environment. The growth and significance of capital markets in the BRIC (Brazil, …

F.A.C.E.S. (Faculty Academic Community Education Showcase): Professional Growth Experiences In A Career University, Paul J. Colbert, Ph.D.

MBA Faculty Conference Papers & Journal Articles

Institutes of higher education exist for the purpose of developing, fostering, nurturing, and stimulating the intellectual growth and development of students. The core values of a college education provide students conceptual and practical educational opportunities that focus on improving their skills and knowledge. These skills and knowledge translate into purposeful, real-life learning experiences. However, in the academic community, learning is not restricted to students. Faculty, too, must be supported and provided opportunities for personal and professional growth and development. Although professional development is not a novel concept in the education profession, schools often take up the gauntlet, but fall short …

Fund-Management Gender Composition: The Impact On Risk And Performance Of Mutual Funds And Hedge Funds, Angela Luongo

Fordham Business Student Research Journal

This paper examines gender differences in fund managers’ risk tolerance and performance. We explore these differences in both the universe of U.S. mutual funds and hedge funds using risk and performance metrics that cover one-year, three-year, and five-year horizons. We find that funds managed by women outperform those managed by men with less risky portfolios. The outperformance persists after adjusting for risk. Overall, the results indicate that female fund managers are severely underrepresented despite their quality performance. A workgroup comprised more equally of male and female managers is likely to lead to greater stability in the financial markets due to …

Developing A Culturally Responsive Classroom Collaborative Of Faculty, Students, And Institution, Paul J. Colbert

MBA Faculty Conference Papers & Journal Articles

Culture is integral to the learning process. It is the organization and way of life within the community of students and teachers and directs the way they communicate, interact, and approach teaching and learning. Although founded in particular values and principles, the academy, like most organizations, is impacted day-to-day by its culture. Yet, the traditional higher education institution has not been designed to operate within a racially or ethnically diverse student population. The social, political, economic, and cultural forces that support the institution influence the teaching and learning environments. To better address cultural diversity in the classroom, faculty must first …

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

Strategic Asymmetric Multicultural Alliances In Business, Anthony James Scriffignano

Antioch University Dissertations & Theses

Global economics and other factors make it increasingly difficult for organizations to operate within the boundaries of one country in a rational way (e.g., leveraging best practices, profitable, achieving goals). In this study, I looked at strategic business alliances, transcending simple quid pro quo relationships to deliver ongoing partner value. I refined my study to multicultural relationships, having differing cultural identities (i.e., ideas, heritage, language, or demographics from differing geographies). Finally, I considered asymmetry (i.e., inequity in working relationship). Using a mixed-methodology design, I surveyed alliance participants and interviewed participants from selected alliances. A multi-case study addresses emergent themes of …

Collaborative Standards, Voluntary Codes And Industry Self-Regulation, Lawrence J. Lad, Craig B. Caldwell

Scholarship and Professional Work - Business

In a complex, global economy, firms seek a range of mechanisms for addressing regulatory and social movement pressures. This requires an evolution beyond our current models of response to regulation and control. This paper offers ideas on collaborative control and industry self-regulation as alternative mechanisms for addressing regulatory complexity. It explores a range of self-regulatory practices worldwide, proposes a framework for examining its use, potential and limits, and discusses the critical role of third-party organisations in the process.

A Note On The Instability Of The Unprojected Individual Level Premium Cost Method, Pierre Devolder, Valerie Goffin

Journal of Actuarial Practice (1993–2006)

We compare the unit credit and the unprojected individual level premium cost methods in a continuous time environment and show that the latter may produce unstable contribution rates in a dynamic environment. Specifically, assuming there are no unfunded liabilities, we prove that the unprojected individual premium cost method may produce non-bounded contributions if benefits change too close to the normal retirement age.

Journal Of Actuarial Practice - Volume 13 (2006) - Contents And Masthead

Journal of Actuarial Practice (1993–2006)

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ …

Estimation Of Large Insurance Losses: A Case Study, Tine Buch-Kromann

Journal of Actuarial Practice (1993–2006)

This paper demonstrates an approach to analyzing liability data recently developed by a Danish insurance company. The approach is based on a Champernowne distribution, which is corrected with a non-parametric estimator. The correction estimator is obtained by transforming the data set with the estimated modified Champernowne cdf and then estimating the density of the transformed data set by using the classical kernel density estimator. Our approach is illustrated by applying it to an actual data set.

Solvency Of Life Insurance Companies: Methodological Issues, Rosa Cocozza, Emilia Di Lorenzo

Journal of Actuarial Practice (1993–2006)

The paper deals with solvency assessment for life insurance business; some methodological issues concerning the solvency of life insurance companies, particularly connected to the investment risk, are suggested. Considerations about the technical equilibrium of an insurance portfolio and the financial regulation lead to a dynamic system involving risk measure and solvency assessment. The formal model is applied to a life annuity cohort in a stochastic context in order to exemplify the potential of the model, especially referred to the need to frame solvency assessment in a dynamic perspective.

On Some Risk-Adjusted Tail-Based Premium Calculation Principles, Edward Furman, Zinoviy Landsman

Journal of Actuarial Practice (1993–2006)

This paper explores two tail-based premium calculation principles, the tail standard deviation (TSD) premium and the tail conditional expectation (TCE) premium, in their risk-adjusted and unadjusted forms. They are risk-adjusted using so-called distortion functions. We prove that the proportional hazard (PH) risk-adjusted TCE premium is larger than the unadjusted TCE premium. Additionally, given a risk distribution with location and scale parameters, we prove that the PH risk-adjusted TCE premium reduces to the unadjusted TSD premium.

Bayesian Analysis Of A Health Insurance Model, Helio S. Migon, Edison M.O. Penna

Journal of Actuarial Practice (1993–2006)

We consider the problem of determining health insurance premiums based on past information on size of loss, number of losses, and size of population at risk. The size of loss and the number of losses are treated as mutually independent random variables. The number of losses is assumed to follow a Poisson process, and the loss sizes are independent and identically distributed non-negative random variables, and the population at risk is assumed to follow a non-linear growth model. An expression for the premium is obtained through maximization of the insurer's expected utility under a Bayesian model. The parameter estimation process …

Analysis Of An Insurance Risk Model With Thinning Dependence And Common Shock, Lai Mei Wan, Kam Chuen Yuen, Wai Keung Li

Journal of Actuarial Practice (1993–2006)

We consider a continuous-time insurance risk model with m dependent classes of business with dependent claim number processes due to thinning dependence and a common shock. The impact of the dependence is studied via the adjustment coefficient. The case m = 2 is investigated analytically for exponential claim distributions and via simulation for non-exponential claim distributions.

Pricing Insurance Policies With A Distribution-Free Financial Pricing Model, Min-Ming Wen

Journal of Actuarial Practice (1993–2006)

The highly skewed and heavy tailed distributions used to model insurance losses (claims) raise a concern about the validity of the applications of the capital asset pricing model (CAPM) to insurance pricing when market risks are essential. This paper provides an alternative pricing model, called the Rubinstein-Leland model, which can be used to price insurance contracts. The Rubinstein-Leland model has a distribution-free feature that can fully capture the asymmetry embedded in insurance losses. Thus, this model is better able to derive fair prices for insurance policies than is the CAPM.

Bivariate Archimedean Copula Models For Censored Data In Non-Life Insurance, Michel Denuit, Oana Purcaru, Ingrid Van Keilegom

Journal of Actuarial Practice (1993–2006)

We describe a methodology based on Archimedean copulas for analyzing nonlife insurance data with censoring present. Specifically, we propose a graphical selection procedure for the nonparametric estimation of the generator. An actual loss-ALAE data set is used for the numerical illustrations and for comparisons of our approach to a few others.

Consistent Assumptions For Modeling Credit Loss Correlations, Jan Dhaene, Marc J. Goovaerts, Robert Koch, Ruben Olieslagers, Olivier Romijn, Steven Vanduffel

Journal of Actuarial Practice (1993–2006)

We consider a single period portfolio of n dependent credit risks that are subject to default during the period. We show that using stochastic loss given default random variables in conjunction with default correlations can give rise to an inconsistent set of assumptions for estimating the variance of the portfolio loss. Two sets of consistent assumptions are provided, which it turns out, also provide bounds on the variance of the portfolio's loss. An example of an inconsistent set of assumptions is given.

Bayesian Analysis Of Insurance Losses Using The Buhlmann-Straub Credibility Model, Abraham J. Van Der Merwe, Kobus N. Bekker

Journal of Actuarial Practice (1993–2006)

We propose a Bayesian analysis to develop credibility estimates of the well known Biihlmann-Straub model. We describe simple numerical methods to obtain exact posterior distributions and predictive densities under this model. These distributions are obtained through Monte Carlo simulations that generate independent samples from the joint posterior distribution. Our methods are therefore preferable to methods such as Gibbs sampling, which generates dependent samples from the joint distribution. The methods discussed also can be extended to more complicated credibility models.

Spatial Distribution Of Frequency And Severity Of Water Claims In California, Gurbhag Singh, Max Tang, Don Mcneill, Lyn Hunstad

Journal of Actuarial Practice (1993–2006)

We examine the frequency and severity of water loss claims for homeowners insurance across the state of California for the experience years 2000, 2001, and 2002. The spatial distribution patterns of frequencies and severities are mapped and analyzed at the zip code level. The maps reveal the pockets of high frequencies and severities. The information provided in this paper will assist actuaries and policy makers in their quest to set accurate rates for homeowners insurance.

Journal Of Actuarial Practice, Volume 13, 2006, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

Bivariate Archimedean Copula Models for Censored Data in Non-Life Insurance • Michel Denuit, Dana Purcaru, and Ingrid Van Keilegom 5

Bayesian Analysis of Insurance Losses Using the Biihlmann-Straub Credibility Model • Abraham J. van der Merwe and Kobus N Bekker . 33

Bayesian Analysis of a Health Insurance Model • Helio S. Migon and Edison M. O. Penna 61

Solvency of Life Insurance Companies: Methodological Issues • Rosa Cocozza and Emilia Di Lorenzo . 81

Pricing Insurance Policies with a Distribution-Free Financial Pricing Model • Min-Ming Wen . 103

A Note on the Instability of the Unprojected Individual Level …

Modeling Clusters Of Extreme Losses, Beatriz Vaz De Melo Mendes, Juliana Sa Freire De Lima

Journal of Actuarial Practice (1993–2006)

We model extreme losses from an excess of loss reinsurance contract under the assumption of the existence of a subordinated process generating sequences of large claims. We characterize clusters of extreme losses and aggregate the excess losses within clusters. The number of clusters is modeled using the usual discrete probability models, and the severity of the sum of excesses within clusters is modeled using a flexible extension of the generalized Pareto distribution. We illustrate the methodology using a Danish fire insurance claims data set. Maximum likelihood point estimates and bootstrap confidence intervals are obtained for the parameters and statistical premium. …

A Primer On Duration, Convexity, And Immunization, Leslaw Gajek, Krzysztof Ostaszewski, Hans-Joachim Zwiesler

Journal of Actuarial Practice (1993–2006)

The concepts of duration, convexity, and immunization are fundamental tools of asset-liability management. This paper provides a theoretical and practical overview of the concepts, largely missing in the existing literature on the subject, and fills some holes in the body of research on the subject. We not present new research, but rather we provide a new presentation of the underlying theory, which we believe to be of value in the new North American actuarial education system.

Optimal Dividend Strategies: Some Economic Interpretations For The Constant Barrier Case, Maite Marmol, M. Merce Claramunt, Antonio Alegre

Journal of Actuarial Practice (1993–2006)

We consider the surplus process of a non-life insurance portfolio with a dividend component represented by a constant dividend barrier strategy. The optimal dividend barrier is known when individual claim amounts follow an exponential distribution. This result for the optimal dividend barrier is used to develop combinations of the levels of the insurer's initial surplus and of the barrier which, under certain economic and financial criteria, can be regarded as optimal.

A New Hybrid Defined Benefit Plan Design, Wayne E. Dydo

Journal of Actuarial Practice (1993–2006)

Traditional defined benefit plans can be difficult to understand and complex to administer. Hybrid plans (cash balance and pension equity) arose in part to address the former issue, but at a price of greater administrative and litigation risk. I introduce a design for defined benefit pension plans that is easy to communicate to participants, allows for accrual patterns that closely replicate those of the two most common forms of hybrid pension plans, and avoids the controversial nondiscrimination issues that currently trouble sponsors of hybrid plans. The design defines the benefit as a fixed percentage of pay payable over a period …

Risk-Based Regulatory Capital For Insurers: A Case Study, Christian Sutherland-Wong, Michael Sherris

Journal of Actuarial Practice (1993–2006)

We study the issues in determining regulatory capital requirements using advanced modeling by assessing and comparing capital requirements under the two alternative approaches. A dynamic financial analysis (DFA) model is used for this case study. These issues are of current international interest as regulators, insurers, and actuaries face the significant issues involved with the introduction of risk-based capital for insurers.

Reputation Pricing: A Model For Valuing Future Life Insurance Policies, Rami Yosef

Journal of Actuarial Practice (1993–2006)

The reputation of a life insurer is used to develop a model for determining the value of future life insurance policies. An M / G / 00 process is used to describe the sales and terminations (due to death or maturity) of future policies. The intensity of the arrival process is assumed to depend on the company's reputation. Explicit expressions are derived for the actuarial reserves and expected profits of these future policies.

On The Pricing Of Top And Drop Excess Of Loss Covers, Jean-Francois Walhin, Michel Denuit

Journal of Actuarial Practice (1993–2006)

A top and drop cover is a treaty that can be found on the retrocession market. It offers capacity that can be used either to protect a top layer or a working layer. The former is called a "top" and the latter is called a "drop." Using the traditional collective risk model, we demonstrate the use of a multivariate version of Panjer's algorithm to price this cover. We also compare the premium obtained within the exact model with the premiums obtained either with the Frechet bounds or with the wrong assumption of independence.

Journal Of Actuarial Practice - Volume 12 (2005) - Contents And Masthead

Journal of Actuarial Practice (1993–2006)

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, Actuarial Frameworks ○ …