Mathematics of Information Technology and Complex Systems


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Risk & Finance

Finsurance: Theory, Computation and Applications

Project leader:

Dr. Tom Salisbury, York University (salt@yorku.ca)

Project description:

With many baby-boomers entering retirement in North America, and with the increasing size of the aging population worldwide, managing retirement income has become an important question for the finance and insurance industry as well as for individuals. At the same time, corporations are stepping away from the standard "pensions" they have traditionally offered employees. As a result, individuals are responsible more often for managing the risks associated with securing their retirement income. Consequently, new products are being designed and offered to retirees which are substantially more sophisticated and complex than standard annuities. Many of them differ from traditional products because of their blend of features from both finance and insurance. This has created a new hybrid class of products known as "finsurance" products. The valuation, hedging and risk analysis of such hybrid products demand novel and innovative tools combining expertise in finance, actuarial science, probability theory, differential equations and numerical methods. This evolution on the life-side of the industry is starting to permeate through to the non-life side as well. This project is focused on developing these analytical tools, and applying them to the problems confronting the insurance sector generally.