Related papers: A recursive algorithm for multivariate risk measur…
In this paper, we consider the portfolio optimization problem in a financial market where the underlying stochastic volatility model is driven by n-dimensional Brownian motions. At first, we derive a Hamilton-Jacobi-Bellman equation…
In this paper we explore ways of numerically computing recursive dynamic monetary risk measures and utility functions. Computationally, this problem suffers from the curse of dimensionality and nested simulations are unfeasible if there are…
We propose a convex formulation for a trading system with the Conditional Value-at-Risk as a risk-adjusted performance measure under the notion of Direct Reinforcement Learning. Due to convexity, the proposed approach can uncover a…
Keeping risk under control is often more crucial than maximizing expected rewards in real-world decision-making situations, such as finance, robotics, autonomous driving, etc. The most natural choice of risk measures is variance, which…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
In this paper, we consider the robust optimal reinsurance investment problem of the insurer under the $\alpha$-maxmin mean-variance criterion in the defaultable market. The financial market consists of risk-free bonds, a stock and a…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
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…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
This paper explores the mean-variance portfolio selection problem in a multi-period financial market characterized by regime-switching dynamics and uncontrollable liabilities. To address the uncertainty in the decision-making process within…
We study risk-sensitive reinforcement learning (RL) based on the entropic risk measure. Although existing works have established non-asymptotic regret guarantees for this problem, they leave open an exponential gap between the upper and…
We investigate the quantification of demographic risk in a framework consistent with the market-consistent valuation imposed by Solvency II. We provide compact formulas for evaluating inflows and outflows of a portfolio of insurance…
Multi-period portfolio optimization is important for real portfolio management, as it accounts for transaction costs, path-dependent risks, and the intertemporal structure of trading decisions that single-period models cannot capture.…
We consider challenging dynamic programming models where the associated Bellman equation, and the value and policy iteration algorithms commonly exhibit complex and even pathological behavior. Our analysis is based on the new notion of…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
A recursive free cash flow model (FCFF) is proposed to determine the corporate value of a company in an efficient market in which new market and company-specific information is modelled by additive white noise. The stochastic equations of…
This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…
CVaR (Conditional Value at Risk) is a risk metric widely used in finance. However, dynamically optimizing CVaR is difficult since it is not a standard Markov decision process (MDP) and the principle of dynamic programming fails. In this…
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…