Related papers: A martingale concept for non-monotone information …
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…
We formulate a dynamic reinsurance problem in which the insurer seeks to control the terminal distribution of its surplus while minimizing the L2-norm of the ceded risk. Using techniques from martingale optimal transport, we show that,…
Information theoretic measures (entropies, entropy rates, mutual information) are nowadays commonly used in statistical signal processing for real-world data analysis. The present work proposes the use of Auto Mutual Information (Mutual…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
This paper develops a continuous-time filtering framework for estimating a hazard rate subject to an unobservable change-point. This framework naturally arises in both financial and insurance applications, where the default intensity of a…
We explore martingale and convex duality techniques to study optimal investment strategies that maximize expected risk-averse utility from consumption and terminal wealth. We consider a market model with jumps driven by (multivariate)…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
The notion of information pervades informal descriptions of biological systems, but formal treatments face the problem of defining a quantitative measure of information rooted in a concept of fitness, which is itself an elusive notion.…
We introduce a novel framework to account for sensitivity to rewards uncertainty in sequential decision-making problems. While risk-sensitive formulations for Markov decision processes studied so far focus on the distribution of the…
In financial markets, the information that traders have about an asset is reflected in its price. The arrival of new information then leads to price changes. The `information-based framework' of Brody, Hughston and Macrina (BHM) isolates…
The data for many classification problems, such as pattern and speech recognition, follow mixture distributions. To quantify the optimum performance for classification tasks, the Shannon mutual information is a natural information-theoretic…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Typically, real-world stochastic processes are not easy to analyze. In this work we study the representation of any stochastic process as a memoryless innovation process triggering a dynamic system. We show that such a representation is…
Despite decades of research in risk management, most of the literature has focused on scalar risk measures (like e.g. Value-at-Risk and Expected Shortfall). While such scalar measures provide compact and tractable summaries, they provide a…
I analyze long-term contracting in insurance markets with asymmetric information. The buyer privately observes her risk type, which evolves stochastically over time. A long-term contract specifies a menu of insurance policies, contingent on…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
We develop a stochastic calculus that makes it easy to capture a variety of predictable transformations of semimartingales such as changes of variables, stochastic integrals, and their compositions. The framework offers a unified treatment…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…