Related papers: Stochastic model of a pension plan
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…
We study the mean escape time in a market model with stochastic volatility. The process followed by the volatility is the Cox Ingersoll and Ross process which is widely used to model stock price fluctuations. The market model can be…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
One of the pillars to build a country's economy is the stock market. Over the years, people are investing in stock markets to earn as much profit as possible from the amount of money that they possess. Hence, it is vital to have a…
We demonstrate that the gain/loss asymmetry observed for stock indices vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
In a collectivised pension fund, investors agree that any money remaining in the fund when they die can be shared among the survivors. We give a numerical algorithm to compute the optimal investment-consumption strategy for an infinite…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
We propose a data-driven Neural Network (NN) optimization framework to determine the optimal multi-period dynamic asset allocation strategy for outperforming a general stochastic target. We formulate the problem as an optimal stochastic…
In this paper, we develop an expected utility model for the retirement behavior in the decumulation phase of Australian retirees with sequential family status subject to consumption, housing, investment, bequest and government provided…
We explore the statistical and economic importance of restrictions on the dynamics of risk compensation from the perspective of a real-time Bayesian learner who predicts bond excess returns using dynamic term structure models (DTSMs). The…
The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…
Designing robust systems for precise prediction of future prices of stocks has always been considered a very challenging research problem. Even more challenging is to build a system for constructing an optimum portfolio of stocks based on…
A stochastic model for behavioral changes by imitative pair interactions of individuals is developed. `Microscopic' assumptions on the specific form of the imitative processes lead to a stochastic version of the game dynamical equations.…
We propose a prediction model based on the minority game in which traders continuously evaluate a complete set of trading strategies with different memory lengths using the strategies' past performance. Based on the chosen trading strategy…
In this paper we test computationally the performance of CAPM in an evolutionary setting. In particular we study the stability of wealth distribution in a financial market where some traders invest as prescribed by CAPM and others behave…
One of the most important studies in finance is to find out whether stock returns could be predicted. This research aims to create a new multivariate model, which includes dividend yield, earnings-to-price ratio, book-to-market ratio as…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
In multi-state life insurance, an adequate balance between analytic tractability, computational efficiency, and statistical flexibility is of great importance. This might explain the popularity of Markov chain modelling, where matrix…