Related papers: Optimal cross hedging for insurance derivatives
Pension schemes all over the world are under increasing pressure to efficiently hedge the longevity risk posed by ageing populations. In this work, we study an optimal investment problem for a defined contribution pension scheme which…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
In this paper, we consider the pricing of derivative products that involve dynamic hedging strategies and payments within the planning horizon. Equity-indexed annuities (EIAs), Guaranteed investment certificate (GIC), American and Barrier…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Natural hedging allows life insurers to manage longevity risk internally by offsetting the opposite exposures of life insurance and annuity liabilities. Although many studies have proposed natural hedging strategies under different…
This paper investigates the dynamic reinsurance design problem under the mean-variance criterion, incorporating heterogeneous beliefs between the insurer and the reinsurer, and introducing an incentive compatibility constraint to address…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
Measuring beliefs about natural disasters is challenging. Deep out-of-the-money options allow investors to hedge at a range of strikes and time horizons, thus the 3-dimensional surface of firm-level option prices provides information on (i)…
Sustainable investing refers to the integration of environmental and social aspects in investors' decisions. We propose a novel methodology based on the Triangulated Maximally Filtered Graph and node2vec algorithms to construct an hedging…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
By adopting a distributional viewpoint on law-invariant convex risk measures, we construct dynamics risk measures (DRMs) at the distributional level. We then apply these DRMs to investigate Markov decision processes, incorporating latent…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the…
Parametric insurance contracts translate index measurements to compensation for policyholders' losses using predefined payment schemes. These need to be designed carefully to keep basis risk, i.e. the disparity between payouts and true…
The objectives of option hedging/trading extend beyond mere protection against downside risks, with a desire to seek gains also driving agent's strategies. In this study, we showcase the potential of robust risk-aware reinforcement learning…
We analyse derivative securities whose value is NOT a deterministic function of an underlying which means presence of a basis risk at any time. The key object of our analysis is conditional probability distribution at a given underlying…