Related papers: A risk management approach to capital allocation
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
We study a continuous-time asset-allocation problem for an insurance firm that backs up liabilities from multiple non-life business lines with underwriting profits and investment income. The insurance risks are captured via a…
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
This paper addresses allocation methodologies for a risk measure inherited from ruin theory. Specifically, we consider a dynamic value-at-risk (VaR) measure defined as the smallest initial capital needed to ensure that the ultimate ruin…
This paper introduces a two-pillar cyber risk management framework to address the pervasive challenges in managing cyber risk. The first pillar, cyber risk assessment, combines insurance frequency-severity models with cybersecurity cascade…
We consider the risk sharing problem for capital requirements induced by capital adequacy tests and security markets. The agents involved in the sharing procedure may be heterogeneous in that they apply varying capital adequacy tests and…
The largest US banks are required by regulatory mandate to estimate the operational risk capital they must hold using an Advanced Measurement Approach (AMA) as defined by the Basel II/III Accords. Most use the Loss Distribution Approach…
The frequent occurrence of natural disasters has posed significant challenges to society, necessitating the urgent development of effective risk management strategies. From the early informal community-based risk sharing mechanisms to…
As part of the new regulatory framework of Solvency II, introduced by the European Union, insurance companies are required to monitor their solvency by computing a key risk metric called the Solvency Capital Requirement (SCR). The official…
Basel II and Solvency 2 both use the Value-at-Risk (VaR) as the risk measure to compute the Capital Requirements. In practice, to calibrate the VaR, a normal approximation is often chosen for the unknown distribution of the yearly log…
Most of the banks' operational risk internal models are based on loss pooling in risk and business line categories. The parameters and outputs of operational risk models are sensitive to the pooling of the data and the choice of the risk…
Over the past decade alternatives to traditional insurance and banking have grown in popularity. The desire to encourage local participation has lead products such as peer-to-peer insurance, reciprocal contracts, and decentralized finance…
Most classification methods provide either a prediction of class membership or an assessment of class membership probability. In the case of two-group classification the predicted probability can be described as "risk" of belonging to a…
In this paper we consider reinsurance or risk sharing from a macroeconomic point of view. Our aim is to find socially optimal reinsurance treaties. In our setting we assume that there are $n$ insurance companies each bearing a certain risk…
South Africa assumes a significant position in the insurance landscape of Africa. The present research based upon qualitative and quantitative analysis, shows that it shows the characteristics of a Complex Adaptive System. In addition, a…
In this paper we introduce a new coherent cumulative risk measure on $\mathcal{R}_L^p$, the space of c\`adl\`ag processes having Laplace transform. This new coherent risk measure turns out to be tractable enough within a class of models…
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…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
This article extends the optimal covariance steering (CS) problem for discrete time linear stochastic systems modeled using moment-based ambiguity sets. To hedge against the uncertainty in the state distributions while performing covariance…