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In a collectivised pension fund, investors agree that any money remaining in the fund when they die can be shared among the survivors. We compute analytically the optimal investment-consumption strategy for a fund of $n$ identical investors…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Research in quantitative finance has demonstrated that reinforcement learning (RL) methods have delivered promising outcomes in the context of hedging financial portfolios. For example, hedging a portfolio of European options using RL…
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…
We study the problem of hedging unit linked life insurance policies whose benefits depend on an investment fund that incorporates environmental criteria in its selection process. Offering these products poses two key challenges:…
We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and who can purchase a reversible life annuity. The surrender charge of a life annuity is a proportion of its…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…
What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
Prize linked savings accounts provide a return in the form of randomly chosen accounts receiving large cash prizes, in lieu of a guaranteed and uniform interest rate. This model became legal for American national banks upon bipartisan…
Consider an American option that pays G(X^*_t) when exercised at time t, where G is a positive increasing function, X^*_t := \sup_{s\le t}X_s, and X_s is the price of the underlying security at time s. Assuming zero interest rates, we show…
This report was originally written as an industry white paper on Hedge Funds. This paper gives an overview to Hedge Funds, with a focus on risk management issues. We define and explain the general characteristics of Hedge Funds, their main…
In this paper, we explore the pricing and hedging strategies for an innovative insurance product called the equity protection swap(EPS). Notably, we focus on the application of EPSs involving cross-currency reference portfolios, reflecting…
How should financial institutions hedge their balance sheets against interest rate risk when managing long-term assets and liabilities? We address this question by proposing a bond portfolio solution based on ambiguity-averse preferences,…
Derivatives, as a critical class of financial instruments, isolate and trade the price attributes of risk assets such as stocks, commodities, and indices, aiding risk management and enhancing market efficiency. However, traditional hedging…
Life expectancy have been increasing over the past years due to better health care, feeding and conducive environment. To manage future uncertainty related to life expectancy, various insurance institutions have resolved to come up with…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest…