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We consider a diffusion approximation to an insurance risk model where an external driver models a stochastic environment. The insurer can buy reinsurance. Moreover, investment in a financial market is possible. The financial market is also…
In this paper we consider a jump-diffusion dynamic whose parameters are driven by a continuous time and stationary Markov Chain on a finite state space as a model for the underlying of European contingent claims. For this class of processes…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact. More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a…
In this paper, we study an optimal excess-of-loss reinsurance and investment problem for an insurer in defaultable market. The insurer can buy reinsurance and invest in the following securities: a bank account, a risky asset with stochastic…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
We consider the problem of valuation of American options written on dividend-paying assets whose price dynamics follows a multidimensional exponential Levy model. We carefully examine the relation between the option prices, related partial…