Related papers: Polynomial Diffusion Models for Life Insurance Lia…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
This paper studies the robust reinsurance and investment games for competitive insurers. Model uncertainty is characterized by a class of equivalent probability measures. Each insurer is concerned with relative performance under the…
We propose a model in which, in exchange to the payment of a fixed transaction cost, an insurance company can choose the retention level as well as the time at which subscribing a perpetual reinsurance contract. The surplus process of the…
The paper proposes an original methodology for constructing quantitative statistical models based on multidimensional distribution functions constructed on the basis of the insurance companies' data on inshurance policies (including…
When faced with a new customer, many factors contribute to an insurance firm's decision of what offer to make to that customer. In addition to the expected cost of providing the insurance, the firm must consider the other offers likely to…
If individuals at the highest mortality risk are also least likely to lapse a life insurance policy, then lapse-supported premiums magnify adverse selection costs. As an example, we model 'Term to 100' contracts, and risk as revealed by…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…
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…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
Understanding mortgage prepayment is crucial for any financial institution providing mortgages, and it is important for hedging the risk resulting from such unexpected cash flows. Here, in the setting of a Dutch mortgage provider, we…
Using particle system methodologies we study the propagation of financial distress in a network of firms facing credit risk. We investigate the phenomenon of a credit crisis and quantify the losses that a bank may suffer in a large credit…
Diffusion of information in networks is at the core of many problems in AI. Common examples include the spread of ideas and rumors as well as marketing campaigns. Typically, information diffuses at a non-linear rate, for example, if markets…
An ergodic analogue of a well-known diffusion model for risk and dividend distribution of a financial company is considered. In this simple primer it is curious how infinitely many optimal strategies are in accordance with the ergodic…
We study the impact of contagion in a network of firms facing credit risk. We describe an intensity based model where the homogeneity assumption is broken by introducing a random environment that makes it possible to take into account the…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
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 introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…