Related papers: An optimization approach to adaptive multi-dimensi…
The collective risk model (CRM) for frequency and severity is an important tool for retail insurance ratemaking, macro-level catastrophic risk forecasting, as well as operational risk in banking regulation. This model, which is initially…
Even in the simple one-factor credit portfolio model that underlies the Basel II regulatory capital rules coming into force in 2007, the exact contributions to credit value-at-risk can only be calculated with Monte-Carlo simulation or with…
Climate adaptation could yield significant benefits. However, the uncertainty of which future climate scenarios will occur decreases the feasibility of proactively adapting. Climate adaptation projects could be underwritten by benefits paid…
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…
We adapt Leland's dynamic capital structure model to the context of an insurance company selling participating life insurance contracts explaining the existence of life insurance contracts which provide both a guaranteed payment and surplus…
Since 2016 the operation of insurance companies in the European Union is regulated by the Solvency II directive. According to the EU directive the capital requirement should be calculated as a 99.5\% of Value at Risk. In this study, we…
The PCL framework provides a comprehensive climate risk management approach grounded in the assessment of societal values of financial and non-financial loss tolerability. The framework optimizes response action across three main clusters,…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
This paper introduces a unified framework for adaptive portfolio management, integrating dynamic Black-Litterman (BL) optimization with the general factor model, Elastic Net regression, and mean-variance portfolio optimization, which allows…
Addressing uncertainty is critical for autonomous systems to robustly adapt to the real world. We formulate the problem of model uncertainty as a continuous Bayes-Adaptive Markov Decision Process (BAMDP), where an agent maintains a…
Under the Basel II standards, the Operational Risk (OpRisk) advanced measurement approach allows a provision for reduction of capital as a result of insurance mitigation of up to 20%. This paper studies the behaviour of different insurance…
In this paper we study how to optimally balance cheap inflexible resources with more expensive, reconfigurable resources despite uncertainty in the input problem. Specifically, we introduce the MinEMax model to study "build versus rent"…
We study a market of investments on networks, where each agent (vertex) can invest in any enterprise linked to her, and at the same time, raise capital for her firm's enterprise from other agents she is linked to. Failing to raise…
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…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
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…
We introduce a dynamic optimization framework to analyze optimal portfolio allocations within an information driven contagious distress model. The investor allocates his wealth across several stocks whose growth rates and distress…
We introduce a new set of consistent measures of risks, in terms of the semi-invariants of pdf's, such that the centered moments and the cumulants of the portfolio distribution of returns that put more emphasis on the tail the…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…