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2020 ; 36
(ä): 101659
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COVID-19, insurer board utility, and capital regulation
#MMPMID32837371
Li X
; Lin P
; Lin JH
Financ Res Lett
2020[Oct]; 36
(ä): 101659
PMID32837371
show ga
This paper develops a down-and-out call option model by introducing a structural
break in volatility to capture the coronavirus (COVID-19) outbreak. The life
insurer's equity and its board's utility are evaluated at the optimal guaranteed
rate in the equity maximization. Results suggest that the seriousness degree of
the COVID-19 outbreak and capital regulation enhance the optimal guaranteed rate
and the board's utility. Increased the board's utility by increasing liabilities
costs insurer profitability. Conflicts of incentives can arise during the
COVID-19 outbreak.