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We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…
In this paper, we consider a class of stochastic optimal control problems with risk constraints that are expressed as bounded probabilities of failure for particular initial states. We present here a martingale approach that diffuses a risk…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
The dual formulation of empirical risk minimization with f-divergence regularization (ERM-fDR) is introduced. The solution of the dual optimization problem to the ERM-fDR is connected to the notion of normalization function introduced as an…
Widespread population aging has made it critical to understand death rates at old ages. However, studying mortality at old ages is challenging because the data are sparse: numbers of survivors and deaths get smaller and smaller with age. We…
A risk of small defined-benefit pension schemes is that there are too few members to eliminate idiosyncratic mortality risk, that is there are too few members to effectively pool mortality risk. This means that when there are few members in…
The two unobservable state variables representing the short and long term factors introduced by Schwartz and Smith in [16] for risk-neutral pricing of futures contracts are modelled as two correlated Ornstein-Uhlenbeck processes. The Kalman…
We formulate conditions for the solvability of the problem of robust utility maximization from final wealth in continuous time financial markets, without assuming weak compactness of the densities of the uncertainty set, as customary in the…
We study the problem of determining risk-minimizing investment strategies for insurance payment processes in the presence of taxes and expenses. We consider the situation where taxes and expenses are paid continuously and symmetrically and…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
This article is the term paper of the course Investments. We mainly focus on modeling long-term investment decisions of a typical utility-maximizing individual, with features of Chinese stock market in perspective. We adopt an OR based…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…
This paper extends the long-term factorization of the stochastic discount factor introduced and studied by Alvarez and Jermann (2005) in discretetime ergodic environments and by Hansen and Scheinkman (2009) and Hansen (2012) in Markovian…
Introduction Lifetime risks quantify health risks from radiation exposure and play an important role in radiation detriment and radon dose conversion. This study considers the lifetime risk of dying from lung cancer related to occupational…
Convex risk measures play a foundational role in the area of stochastic optimization. However, in contrast to risk neutral models, their applications are still limited due to the lack of efficient solution methods. In particular, the mean…
This paper revisits the classical Merton portfolio choice problem over infinite horizon for high risk aversion, addressing technical challenges related to establishing the existence and identification of optimal strategies. Traditional…