Related papers: Precautionary Measures for Credit Risk Management …
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
This paper considers a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure, with drifts that are functions of an auxiliary diffusion factor process. The…
Financial returns are known to exhibit heavy tails, volatility clustering and abrupt jumps that are poorly captured by classical diffusion models. Advances in machine learning have enabled highly flexible functional forms for conditional…
For an insurance company with reserve modeled by the spectrally negative L\'{e}vy process, we study the optimal impulse dividend maximizing the expected accumulated net dividend payment subtracted by the accumulated cost of injecting…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
We investigate a value-maximizing problem incorporating a human behavior pattern: present-biased-ness, for a firm which navigates strategic decisions encompassing earning retention/payout and capital injection policies, within the framework…
We consider the optimal stopping of a class of spectrally negative jump diffusions. We state a set of conditions under which the value is shown to have a representation in terms of an ordinary nonlinear programming problem. We establish a…
This paper considers an optimal dividend distribution problem for an insurance company where the dividends are paid in a foreign currency. In the absence of dividend payments, our risk process follows a spectrally negative L\'evy process.…
We consider the classical problem of maximizing the expected utility of terminal net wealth with a final random liability in a simple jump-diffusion model. In the spirit of Horst et al. (2014) and Santacroce-Trivellato (2014), under…
We consider option hedging in a model where the underlying follows an exponential L\'evy process. We derive approximations to the variance-optimal and to some suboptimal strategies as well as to their mean squared hedging errors. The…
In this paper, we deal with an axiomatic approach to default risk. We introduce the notion of a default risk measure, which generalizes the classical probability of default (PD), and allows to incorporate model risk in various forms. We…
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
We consider the jump-diffusion risky asset model and study its conditional prediction laws. Next, we explain the conditional least square hedging strategy and calculate its closed form for the jump-diffusion model, considering the…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
Flight delay is a significant issue affecting air travel. The runway system, frequently falling short of demand, serves as a bottleneck. As demand increases, runway capacity expansion becomes imperative to mitigate congestion. However, the…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
This paper is concerned with the problem of finding the optimal of extraction policies of an oil field in light of various financial and economical restrictions and constraints. Taking into account the fact that the oil price in worldwide…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…