Portfolio modelling of counterparty reinsurance default risk

Technical papers

We treat the bouquet of reinsurance treaties and the induced counterparty default risk for a primary insurer as similar to an investment portfolio. Contrary to traditional mean-variance portfolio design, which implies a large number of realisations of random variables and comparable sized components, reinsurance default risk typically is a rare event process with potential large severity components. Moreover, the covariance structure is largely driven by a common shock. The probability law for

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