Related papers: The perverse incentive for insurance instruments t…
This paper analyzes the hypothesis that returns play a risk-compensating role in the market for corporate revolving lines of credit. Specifically, we test whether borrower risk and the expected return on these debt instruments are…
One index satisfies the duality axiom if one agent, who is uniformly more risk-averse than another, accepts a gamble, the latter accepts any less risky gamble under the index. Aumann and Serrano (2008) show that only one index defined for…
Credit Valuation Adjustment captures the difference in the value of derivative contracts when the counterparty default probability is taken into account. However, in the context of a network of contracts, the default probability of a direct…
This paper investigates a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility preference and the insurer is risk neutral and employs the mean-variance premium principle. To eliminate potential moral…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
The study deals with the ruin problem when an insurance company invests its reserve in a risky asset whose the price dynamics is given by a geometric L\'evy process. Considering the ruin probability as a of the capital reserve we obtain for…
Consider the optimal dividend problem for an insurance company whose uncontrolled surplus precess evolves as a spectrally negative Levy process. We assume that dividends are paid to the shareholders according to admissible strategies whose…
We study an optimal reinsurance problem under a diffusion risk model for an insurer who aims to minimize the probability of lifetime ruin. To rule out moral hazard issues, we only consider moral-hazard-free reinsurance contracts by imposing…
In this paper the utility optimization problem for a general insurance model is studied. The reserve process of the insurance company is described by a stochastic differential equation driven by a Brownian motion and a Poisson random…
In this paper, we study two optimisation settings for an insurance company, under the constraint that the terminal surplus at a deterministic and finite time $T$ follows a normal distribution with a given mean and a given variance. In both…
This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…
This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
We solve the pricing problem for perpetual American puts and calls on dividend-paying assets. The dependence of a dividend process on the underlying stochastic factor is fairly general: any non-decreasing function is admissible. The…
This note presents a kind of the strong law of large numbers for an insurance risk caused by a single catastrophic event rather than by an accumulation of independent and identically distributed risks. We derive this result by a large…
In this paper, we investigate the robust optimal reinsurance,investment,and internal surplus distribution (i.e., consumption) problem for an insurer with Epstein-Zin recursive preferences in an incomplete market. It is assumed that the…
A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with…
In this paper, we study an optimal insurance problem for a risk-averse individual who seeks to maximize the rank-dependent expected utility (RDEU) of her terminal wealth, and insurance is priced via a general distortion-deviation premium…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the…