Related papers: Hedging Pure Endowments with Mortality Derivatives
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
This article presents FVA and CVA of a bilateral derivative in a coherent manner, based on recent developments in fair value accounting and ISDA standards. We argue that a derivative liability, after primary risk factors being hedged,…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
Recent studies have identified long-range dependence as a key feature in the dynamics of both mortality and interest rates. Building on this insight, we develop a novel bi-variate stochastic framework based on mixed fractional Brownian…
In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…
We maximize the expected utility from terminal wealth for an HARA investor when the market price of risk is an unobservable random variable. We compute the optimal portfolio explicitly and explore the effects of learning by comparing it…
We investigate models of the life annuity insurance when the company invests its reserve into a risky asset with price following a geometric Brownian motion. Our main result is an exact asymptotic of the ruin probabilities for the case of…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
This work studies the dynamic risk management of the risk-neutral value of the potential credit losses on a portfolio of derivatives. Sensitivities-based hedging of such liability is sub-optimal because of bid-ask costs, pricing models…
For a public company, pricing and hedging models of options and equity--linked life insurance products have been sufficiently developed. However, for a private company, because of unobserved prices, pricing and hedging models of 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…
We present here a regress later based Monte Carlo approach that uses neural networks for pricing high-dimensional contingent claims. The choice of specific architecture of the neural networks used in the proposed algorithm provides for…
Historical tontines promised enormous rewards to the last survivors at the expense of those who died early. While this design appealed to the gambling instinct, it is a suboptimal way to manage longevity risk during retirement. This is why…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is…
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…
We investigate the quantification of demographic risk in a framework consistent with the market-consistent valuation imposed by Solvency II. We provide compact formulas for evaluating inflows and outflows of a portfolio of insurance…