Related papers: Capital allocation and risk appetite under Solvenc…
The EU Solvency II directive recommends insurance companies to pay more attention to the risk management methods. The sense of risk management is the ability to quantify risk and apply methods that reduce uncertainty. In life insurance, the…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
Research shows, that the major issue in development of quality software is precise estimation. Further this estimation depends upon the degree of intricacy inherent in the software i.e. complexity. This paper attempts to empirically…
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
In this work we analytically solve an optimal retirement problem, in which the agent optimally allocates the risky investment, consumption and leisure rate to maximise a gain function characterised by a power utility function of consumption…
In this paper, we developed the Merton's structural model for public companies under an assumption that liabilities of the companies are observed. Using Campbell and Shiller's approximation method, we obtain formulas of risk-neutral equity…
Protecting against cyber-threats is vital for every organization and can be done by investing in cybersecurity controls and purchasing cyber insurance. However, these are interlinked since insurance premiums could be reduced by investing…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
The aim of this paper is to study a new methodological framework for systemic risk measures by applying deep learning method as a tool to compute the optimal strategy of capital allocations. Under this new framework, systemic risk measures…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We propose a portfolio approach for operational risk quantification based on a class of analytical models from which we derive new results on the correlation problem. In particular, we show that uniform correlation is a robust assumption…
This paper presents sensitivity analyses of resilience-based active distribution system planning solutions with respect to different parameters. The distribution system planning problem is formulated as a two-stage risk-averse stochastic…
This paper proposes a safety analysis method that facilitates a tunable balance between the worst-case and risk-neutral perspectives. First, we define a risk-sensitive safe set to specify the degree of safety attained by a stochastic…
Within the Solvency II framework the insurance industry requires a realistic modelling of the risk processes relevant for its business. Every insurance company should be capable of running a holistic risk management process to meet this…
This paper extends the optimal covariance steering problem for linear stochastic systems subject to chance constraints to account for optimal risk allocation. Previous works have assumed a uniform risk allocation to cast the optimal control…
We define and develop an approach for risk budgeting allocation - a risk diversification portfolio strategy - where risk is measured using a dynamic time-consistent risk measure. For this, we introduce a notion of dynamic risk contributions…
The standard approach to risk-averse control is to use the Exponential Utility (EU) functional, which has been studied for several decades. Like other risk-averse utility functionals, EU encodes risk aversion through an increasing convex…
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider…