Current research

Nonlinear lapse risk in the life insurance sector
with Till Förstemann and Andreas Löffler; joint research project with Deutsche Bundesbank

We show that a mass lapse is the unique Nash equilibrium in a model with heterogenous policyholders whenever the market value of a life insurer's assets falls below aggregate effective surrender values, accounting for monetary and non-monetary surrender impediments. The model implies a critical interest rate at which insurers face a mass lapse. We present a reverse stress test and estimate historical critical interest rates in Germany.

Nonlinear frictions and bounded arbitrage
with Andreas Löffler and Gregor Svindland

We provide a complete characterization of arbitrage under nonlinear frictions within a discrete-time relative pricing model with a continuous state space. Building on an earlier paper, we establish explicit bounds for arbitrage gains depending directly on the structure of the cost function. Our work complements existing research on equivalent martingale measures and hedging with transaction costs.

Working papers

Nonlinear taxation and bounded arbitrage
with Marcus Becker and Andreas Löffler

We provide a complete characterization of arbitrage under nonlinear taxation within a discrete-time relative pricing model with a finite state space. We establish explicit bounds for arbitrage gains depending directly on the interaction between the structure of the tax function and an endogenous equilibrium tax rate. We also show that a single-period market with nonlinear taxation is always arbitrage-free.