Risk Management
Debt recycling is a leveraged equity management strategy in which homeowners use accumulated home equity to finance investments, applying the resulting returns to accelerate mortgage repayment. We propose a novel framework to model equity…
We revisit the well-studied superhedging problem under proportional transaction costs in continuous time using the recently developed tools of set-valued stochastic analysis. By relying on a simple Black-Scholes-type market model for…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
Incorporating spatial information, particularly those influenced by climate, weather, and demographic factors, is crucial for improving underwriting precision and enhancing risk management in insurance. However, spatial data are often…
Wildland-Urban Interface (WUI) fires represent a compound disaster resulting from the interactions between natural ecosystems and human settlements, characterized by significantly dynamic evolving risks. However, most current risk…
Systemic risk measures aggregate the risks from multiple financial institutions to find system-wide capital requirements. Though much attention has been given to assessing the level of systemic risk, less has been given to allocating that…
In this paper, we develop the lower and upper bounds of worst-case distortion riskmetrics and weighted entropy for unimodal, and symmetric unimodal distributions when mean and variance information are available. We also consider the sharp…
We consider an insurance company which faces financial risk in the form of insurance claims and market-dependent surplus fluctuations. The company aims to simultaneously control its terminal wealth (e.g. at the end of an accounting period)…
A mutual insurance company (MIC) is a type of consumer cooperative owned by its policyholders. By purchasing insurance from an MIC, policyholders effectively become member-owners of the company and are entitled to a share of the surplus,…
This paper introduces the Fractal-Chaotic Oscillation Co-driven (FCOC) framework, a novel paradigm for financial volatility forecasting that systematically resolves the dual challenges of feature fidelity and model responsiveness. FCOC…
This paper studies the mathematical problem of allocating payouts (compensations) in an endowment contingency fund using a risk-sharing rule that satisfies full allocation. Besides the participants, an administrator manages the fund by…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
The efficiency of pension schemes in Kenya invites elevated interest owing to the increasing pension contribution amounts and the expectation that benefits paid out of these schemes would protect members from old age poverty. The study…
As life expectancy in Kenya increases, so does the need for efficient pension schemes that can secure a dignified retirement and protect members from old age poverty. Limited research, however, has explored the efficiency of these schemes…
We enhance the Universal Portfolio Shrinkage Approximator (UPSA) of Kelly et al. (2023) by making it more robust with respect to estimation noise and covariate shift. UPSA optimizes the realized Sharpe ratio using a relatively small…
We establish sharp upper and lower bounds for distortion risk metrics under distributional uncertainty. The uncertainty sets are characterized by four key features of the underlying distribution: mean, variance, unimodality, and Wasserstein…
The 2008 financial crisis exposed fundamental vulnerabilities in interconnected banking systems, yet existing frameworks fail to integrate spatial propagation with network contagion mechanisms. This paper develops a unified spatial-network…
Financial market resilience reflects the ability of a financial market to withstand external shocks and to recover from them, while its measurement has yet to be standardized. Accordingly, this paper quantifies the adaptability and…
Motivated by the problem of finding dual representations for quasiconvex systemic risk measures in financial mathematics, we study quasiconvex compositions in an abstract infinite-dimensional setting. We calculate an explicit formula for…
A novel procedure is presented for finding the true but latent endpoints within the repayment histories of individual loans. The monthly observations beyond these true endpoints are false, largely due to operational failures that delay…