Related papers: Dynamic risk diversification and insurance premium…
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might…
This paper studies Pareto-optimal reinsurance design in a monopolistic market with multiple primary insurers and a single reinsurer, all with heterogeneous risk preferences. The risk preferences are characterized by a family of risk…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We present an approach to derivative exposure management based on subjective and implied probabilities. We suggest to maximize the valuation difference subject to risk constraints and propose a class of risk measures derived from the…
We analyze multiline pricing and capital allocation in equilibrium no-arbitrage markets. Existing theories often assume a perfect complete market, but when pricing is linear, there is no diversification benefit from risk pooling and…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We study risk processes with level dependent premium rate. Assuming that the premium rate converges, as the risk reserve increases, to the critical value in the net-profit condition, we obtain upper and lower bounds for the ruin…
This paper investigates a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility preference and the insurer is risk neutral and employs the mean-variance premium principle. To eliminate potential moral…
We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We…
We consider the problem of optimal risk sharing in a pool of cooperative agents. We analyze the asymptotic behavior of the certainty equivalents and risk premia associated with the Pareto optimal risk sharing contract as the pool expands.…
In this paper, we consider the problem of optimal reinsurance design, when the risk is measured by a distortion risk measure and the premium is given by a distortion risk premium. First, we show how the optimal reinsurance design for the…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
In the classical static optimal reinsurance problem, the cost of capital for the insurer's risk exposure determined by a monetary risk measure is minimized over the class of reinsurance treaties represented by increasing Lipschitz retained…
We study the optimal decisions and equilibria of agents who aim to minimize their risks by allocating their positions over extremely heavy-tailed (i.e., infinite-mean) and possibly dependent losses. The loss distributions of our focus are…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
The present paper addresses the issue of the stochastic control of the optimal dynamic reinsurance policy and dynamic dividend strategy, which are state-dependent, for an insurance company that operates under multiple insurance lines of…
We study optimal risk sharing among $n$ agents endowed with distortion risk measures. Our model includes market frictions that can either represent linear transaction costs or risk premia charged by a clearing house for the agents. Risk…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…