Related papers: Pricing variable annuities with multi-layer expens…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this…
This paper concerns the dual risk model, dual to the risk model for insurance applications, where premiums are surplus-dependent. In such a model premiums are regarded as costs, while claims refer to profits. We calculate the mean of the…
In this paper, we investigate a financial market model consisting of a risky asset, modeled as a general diffusion parameterized by a scale function and a speed measure, and a bank account process with a constant interest rate. This…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
Actuaries use predictive modeling techniques to assess the loss cost on a contract as a function of observable risk characteristics. State-of-the-art statistical and machine learning methods are not well equipped to handle hierarchically…
We present a new approximation scheme for the price and exercise policy of American options. The scheme is based on Hermite polynomial expansions of the transition density of the underlying asset dynamics and the early exercise premium…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
We study the problem of reconstruction of special special time dependent local volatility from market prices of options with different strikes at two expiration times. For a general diffusion process we apply the linearization technique and…
We study the design of an optimal insurance contract in which the insured maximizes her expected utility and the insurer limits the variance of his risk exposure while maintaining the principle of indemnity and charging the premium…
This paper proposes a flexible and analytically tractable class of frequency and severity models for predicting insurance claims. The proposed model is able to capture nonlinear relationships in explanatory variables by characterizing the…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
We study the effect of parameter uncertainty on a stochastic diffusion model, in particular the impact on the pricing of contingent claims, using methods from the theory of Dirichlet forms. We apply these techniques to hedging procedures in…
We consider an insurance entity endowed with an initial capital and a surplus process modelled as a Brownian motion with drift. It is assumed that the company seeks to maximise the cumulated value of expected discounted dividends, which are…
In this paper, we investigate a complex variation of the standard joint life annuity policy by introducing three distinct contingent benefits for the surviving member(s) of a couple, along with a contingent benefit for their beneficiaries…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…