Actuarial & Financial Mathematics
What we do
We are one of the largest Actuarial and Financial Mathematics research groups in the UK.
Reflecting its location in Edinburgh, one of Europe's leading centres for asset management and banking, the emphasis of the research undertaken is in risk and asset management.
The Group organises regular seminars in Actuarial and Financial Mathematics, to supplement those in Probability and Statistics. We have strong links to the Maxwell Institute and to the Centre for Finance and Investment.
Specific areas of the groups' activity include:
- Risk measures and capital adequacy
- Enterprise Risk Management
- Methodology for integrated financial risk management
- Econometrics of financial time series
- Credit risk modelling
- Extreme value theory for heavy-tailed risks
- Modelling dependent risks and copulas
- Genetics and Insurance
- Modelling and projection of mortality rates
- Income protection insurance
- Critical illness insurance
- Ruin theory
Finance & insurance interface
- Pricing and hedging for long-term financial guarantees: e.g. guaranteed annuity options
- Pricing and securitization of longevity risk
- Asset-liability modelling for life insurance
- Fair valuation of insurance liabilities
- Asset-liability modelling for defined-contribution and defined-benefit pension plans; risk analysis; design of optimal control strategies for assets and contributions Utility optimisation.
Stochastic asset models
- Term structure models for derivative pricing and long-term risk management
- Multi-asset models for asset-liability management
- Application of stochastic control techniques in commodity markets.
Pricing & hedging of derivative securities
- Derivative pricing when stock prices are driven by Levy processes
- Optimal stopping problems and exotic option pricing
- Pricing of perpetual American options
- Hedging of securities in incomplete financial markets
- Comparison of risk-minimising and equilibrium approaches to security pricing
Software & Data Resources
David Wilkie and Andrew Cairns have built up a substantial database for UK government bonds with financial support from Institute of Actuaries. This includes prices, amounts in issue, index values and details of each security in issue. The database will be updated on a regular basis.
Modelling, Measurement & Management of Longevity Risk by Professor Andrew Cairns