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When faced with a new customer, many factors contribute to an insurance firm's decision of what offer to make to that customer. In addition to the expected cost of providing the insurance, the firm must consider the other offers likely to…
We determine the optimal investment strategy in a Black-Scholes financial market to minimize the so-called {\it probability of drawdown}, namely, the probability that the value of an investment portfolio reaches some fixed proportion of its…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
A potential objective of every financial organization is to retain existing customers and attain new prospective customers for long-term. The economic behaviour of customer and the nature of the organization are controlled by a prescribed…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
The risk premium of a policy is the sum of the pure premium and the risk loading. In the classification ratemaking process, generalized linear models are usually used to calculate pure premiums, and various premium principles are applied to…
Price discrimination for maximizing expected profit is a well-studied concept in economics and there are various methods that achieve the maximum given the user type distribution and the budget constraints. In many applications,…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
Managing stock efficiently remains a core issue in modern logistics, where companies must reconcile cost efficiency with dependable service despite unpredictable market conditions. Conventional models often overlook the direct connection…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
This paper studies the bank dynamic decision problem in the intermediate time step for a discrete-time setup. We have considered a three-time-step model. Initially, the banks raise money through debt and equity and invest in different types…
The purpose of the research presented in this article is to develop a dynamic system for forecasting and minimizing the risks of an industrial company based on their quantitative assessment. The article considers the conceptual apparatus of…
Equity risk premium is a central component of every risk and return model in finance and a key input to estimate costs of equity and capital in both corporate finance and valuation. An article by Damodaran examines three broad approaches…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
Credit risk may be warehoused by choice, or because of limited hedging possibilities. Credit risk warehousing increases capital requirements and leaves open risk. Open risk must be priced in the physical measure, rather than the risk…
A retention strategy based on an enlightened lapse model is a powerful profitabilitylever for a life insurer. Some machine learning models are excellent at predicting lapse,but from the insurer's perspective, predicting which policyholder…
This paper argues that the fundamental principle of contemporary financial economics is balanced reciprocity, not the principle of utility maximisation that is important in economics more generally. The argument is developed by analysing…
This paper studies the properties of the optimal portfolio-consumption strategies in a {finite horizon} robust utility maximization framework with different borrowing and lending rates. In particular, we allow for constraints on both…