Related papers: Dynamic risk diversification and insurance premium…
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…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
This paper studies a dynamic optimal reinsurance and dividend-payout problem for an insurance company in a finite time horizon. The goal of the company is to maximize the expected cumulative discounted dividend payouts until bankruptcy or…
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
Portfolio diversification is a cornerstone of modern finance, while risk aversion is central to decision theory; both concepts are long-standing and foundational. We investigate their connections by studying how different forms of…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
We define and develop an approach for risk budgeting allocation - a risk diversification portfolio strategy - where risk is measured using a dynamic time-consistent risk measure. For this, we introduce a notion of dynamic risk contributions…
The seller's risk-indifference price evaluation is studied. We propose a dynamic risk-indifference pricing criteria derived from a fully-dynamic family of risk measures on the $L_p$-spaces for $p\in [1,\infty]$. The concept of fully-dynamic…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
In this paper, we are concerned with the optimization of a dynamic investment portfolio when the securities which follow a multivariate Merton model with dependent jumps are periodically invested and proceed by approximating the…
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 consider the problem of minimizing the probability of ruin by purchasing reinsurance whose premium is computed according to the mean-variance premium principle, a combination of the expected-value and variance premium principles. We…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
We establish the first axiomatic theory for diversification indices using six intuitive axioms: non-negativity, location invariance, scale invariance, rationality, normalization, and continuity. The unique class of indices satisfying these…