Related papers: Risk Concentration and Diversification: Second-Ord…
As financial instruments grow in complexity more and more information is neglected by risk optimization practices. This brings down a curtain of opacity on the origination of risk, that has been one of the main culprits in the 2007-2008…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
We consider an optimal control problem of a property insurance company with proportional reinsurance strategy. The insurance business brings in catastrophe risk, such as earthquake and flood. The catastrophe risk could be partly reduced by…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Distributional reinforcement learning (RL) -- in which agents learn about all the possible long-term consequences of their actions, and not just the expected value -- is of great recent interest. One of the most important affordances of a…
We consider optimization problems with manifold-valued constraints. These generalize classical equality and inequality constraints to a setting in which both the domain and the codomain of the constraint mapping are smooth manifolds. We…
This note presents a kind of the strong law of large numbers for an insurance risk caused by a single catastrophic event rather than by an accumulation of independent and identically distributed risks. We derive this result by a large…
We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. Building on the theory on multiple-prior optimal stopping we propose a valuation functional with sound…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
Residual coherence is a graphical tool for selecting potential second-order interaction terms as functions of a single time series and its lags. This paper extends the notion of residual coherence to account for interaction terms of…
Matrix concentration inequalities give bounds for the spectral-norm deviation of a random matrix from its expected value. These results have a weak dimensional dependence that is sometimes, but not always, necessary. This paper identifies…
While consolidation strategies form the backbone of many supply chain optimisation problems, exploitation of multi-tier material relationships through consolidation remains an understudied area, despite being a prominent feature of…
--- the companies populating a Stock market, along with their connections, can be effectively modeled through a directed network, where the nodes represent the companies, and the links indicate the ownership. This paper deals with this…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
This paper investigates the second order asymptotic expansion for tail probabilities of discounted aggregate claims in continuous-time renewal risk models with constant interest force. Concretely, two types of continuous-time renewal risk…
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…