Related papers: Financial option insurance
The net-premium principle is considered to be the most genuine and fair premium principle in actuarial applications. However, an insurance company, applying the net-premium principle, goes bankrupt with probability one in the long run, even…
Unlike other industries in which intellectual property is patentable, the financial industry relies on trade secrecy to protect its business processes and methods, which can obscure critical financial risk exposures from regulators and the…
Nowadays, cyber threats are considered among the most dangerous risks by top management of enterprises. One way to deal with these risks is to insure them, but cyber insurance is still quite expensive. The insurance fee can be reduced if…
When pricing options, there may be different views on the instantaneous mean return of the underlying price process. According to Black (1972), where there exist heterogeneous views on the instantaneous mean return, this will result in…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of…
Flexibility options, such as demand response, energy storage and interconnection, have the potential to reduce variation in electricity prices between different future scenarios, therefore reducing investment risk. Moreover, investment in…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
This paper proposes two mixed models to study a consumer's optimal saving in the presence of two types of risk.
Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
We analyze the potential of reinsurance for reversing the current trend of decreasing capital guarantees in life insurance products. Providing an insurer with an opportunity to shift part of the financial risk to a reinsurer, we solve the…
The financial industry should be involved in mitigating the risk of downturns in the financial wellbeing indices around the world by implementing well-developed financial tools such as insurance instruments on the underlying wellbeing…
This article provides a list of counterexamples, where some of the popular fx option interpolations break down. Interpolation of FX option prices (or equivalently volatilities), is key to risk-manage not only vanilla FX option books, but…
The rapid dissemination of information through digital platforms has revolutionized the way we access and consume news and information, particularly in the realm of finance. However, this digital age has also given rise to an alarming…
When an insurance note is also a derivative a serious problem arises because a derivative must be fulfilled immediately. This feature of derivatives prevents claims processing procedures that screen out ineligible claims. This, in turn,…
All the financial practitioners are working in incomplete markets full of unhedgeable risk-factors. Making the situation worse, they are only equipped with the imperfect information on the relevant processes. In addition to the market risk,…
This article presents FVA and CVA of a bilateral derivative in a coherent manner, based on recent developments in fair value accounting and ISDA standards. We argue that a derivative liability, after primary risk factors being hedged,…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
We develop a model of wishful thinking that incorporates the costs and benefits of biased beliefs. We establish the connection between distorted beliefs and risk, revealing how wishful thinking can be understood in terms of risk measures.…
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…