Related papers: Stochastic model of a pension plan
Financial markets are integral to a country's economic success, yet their complex nature raises challenging issues for predicting their behaviors. There is a growing demand for an integrated system that explores the vast and diverse data in…
Almost every public pension system shares two attributes: earning deductions to finance benefits, and benefits that depend on earnings. This paper analyzes theoretically and empirically the trade-off between social insurance and incentive…
In this paper we propose a new model for volatility fluctuations in financial time series. This model relies on a non-stationary gaussian process that exhibits aging behavior. It turns out that its properties, over any finite time interval,…
In this article, the long-term behavior of the stock market index of the New York Stock Exchange is studied, for the period 1950 to 2013. Specifically, the CRSP Value-Weighted and CRSP Equal-Weighted index are analyzed in terms of market…
This paper investigates robust stochastic differential games among insurers under model uncertainty and stochastic volatility. The surplus processes of ambiguity-averse insurers (AAIs) are characterized by drifted Brownian motion with both…
Financial markets are an intriguing place that offer investors the potential to gain large profits if timed correctly. Unfortunately, the dynamic, non-linear nature of financial markets makes it extremely hard to predict future price…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
We consider a structural stochastic volatility model for the loss from a large portfolio of credit risky assets. Both the asset value and the volatility processes are correlated through systemic Brownian motions, with default determined by…
Performance of investment managers are evaluated in comparison with benchmarks, such as financial indices. Due to the operational constraint that most professional databases do not track the change of constitution of benchmark portfolios,…
Through a stochastic control theoretic approach, we analyze reputation games where a strategic long-lived player acts in a sequential repeated game against a collection of short-lived players. The key assumption in our model is that the…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
In this work, we address the optimal retirement problem in the presence of a stochastic wage, formulated as a free boundary problem. Specifically, we explore an incomplete market setting where the wage cannot be perfectly hedged through…
Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line…
The purpose is to compare the perfect Stochastic Return (SR) model like Islamic banks to the Fixed Return (FR) model as in conventional banks by measuring up their impacts at the macroeconomic level. We prove that if the optimal choice of…
This paper studies the robust reinsurance and investment games for competitive insurers. Model uncertainty is characterized by a class of equivalent probability measures. Each insurer is concerned with relative performance under the…
In the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…
This paper investigates the optimal management of an aggregated defined benefit pension plan in a stochastic environment. The interest rate follows the Ornstein-Uhlenbeck model, the benefits follow the geometric Brownian motion while the…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be…