Contagion modeling between the financial and insurance markets with time changed processes
Abstract This study analyzes the impact of contagion between financial and non life insurance markets on the asset liability management policy of an insurance company. The indirect dependence between these markets is modeled by assuming that the assets return and non life insurance claims are led respectively by time changed Brownian and jump processes, for which stochastic clocks are integrals of mutually self exciting processes. This model exhibits delayed co movements between financial and non life insurance markets, caused by events like natural disasters, epidemics, or economic recessions.
Insurance: Mathematics and Economics