Research-A decomposition framework for managing hybrid liabilities

Research

All

A decomposition framework for managing hybrid liabilities

Speaker: Daniel Linders（KU Leuven）
Time: Oct 17, 2025, 16:30-17:30
Location: M1001, College of Science Building

Abstract

In this paper, we propose a four-step decomposition of hybrid liabilities into a hedgeable part, an idiosyncratic part, a financial systematic part, and an actuarial systematic part. We generalize existing approaches for decomposing hybrid liabilities by incorporating dependence between financial and actuarial markets and allowing heterogeneity in policyholder-specific risks. Our model provides a market- and model-consistent valuation framework which we illustrate using a portfolio of with-profit pure endowment contracts.