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Risk management in financial derivative markets requires inevitably the calculation of the different price sensitivities. The literature contains an abundant amount of research works that have studied the computation of these important…
This paper approaches the definition and properties of dynamic convex risk measures through the notion of a family of concave valuation operators satisfying certain simple and credible axioms. Exploring these in the simplest context of a…
We study the risk performance of distributed learning for the regularization empirical risk minimization with fast convergence rate, substantially improving the error analysis of the existing divide-and-conquer based distributed learning.…
We investigate a multi-factor extension of the asymptotic single risk factor (ASRF) model that underlies the capital charges of the "Basel II Accord". In this extended model, it is still possible to derive closed-form solutions for the risk…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs…
While looking for abductive explanations of a given set of manifestations, an ordering between possible solutions is often assumed. The complexity of finding/verifying optimal solutions is already known. In this paper we consider the…
Machine learning typically presupposes classical probability theory which implies that aggregation is built upon expectation. There are now multiple reasons to motivate looking at richer alternatives to classical probability theory as a…
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
Risk allocation, the decomposition of a portfolio-wide risk measure into component contributions, is a fundamental problem in financial risk management due to the non-additive nature of risk measures, the layered organizational structures…
We consider settings in which the distribution of a multivariate random variable is partly ambiguous. We assume the ambiguity lies on the level of the dependence structure, and that the marginal distributions are known. Furthermore, a…
Consider a probability distribution subordinate to a subexponential distribution with finite mean. In this paper, we discuss the second order tail behavior of the subordinated distribution within a rather general framework in which we do…
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when asset returns are altered with a generalized Prospect…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
The paper presents an analysis performed over the worldwide top 150 firms in the pharmaceutical industry. It begins with a test of the Gibrat's Law of Proportionate Effect finding, in line with previous literature, a violation concerning…
Financial institutions and insurance companies that analyze the evolution and sources of profits and losses often look at risk factors only at discrete reporting dates, ignoring the detailed paths. Continuous-time decompositions avoid this…
Distributional reinforcement learning demonstrates state-of-the-art performance in continuous and discrete control settings with the features of variance and risk, which can be used to explore. However, the exploration method employing the…
Risk adjustment in health care aims to redistribute payments to insurers based on costs. However, risk adjustment formulas are known to underestimate costs for some groups of patients. This undercompensation makes these groups unprofitable…
The dual risk model is a popular model in finance and insurance, which is often used to model the wealth process of a venture capital or high tech company. Optimal dividends have been extensively studied in the literature for a dual risk…