Related papers: Nonlinear reserving and multiple contract modifica…
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…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
This paper first describes a class of uncertain stochastic control systems with Markovian switching, and derives an It\^o-Liu formula for Markov-modulated processes. And we characterize an optimal control law, which satisfies the…
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…
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap. Although swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as longevity caps, also provide…
Maintaining the predictive performance of pricing models is challenging when insurance portfolios and data-generating mechanisms evolve over time. Focusing on non-life insurance, we adopt the concept-drift terminology from machine learning…
The basic principle of any version of insurance is the paradigm that exchanging risk by sharing it in a pool is beneficial for the participants. In case of independent risks with a finite mean this is the case for risk averse decision…
Many investment models in discrete or continuous-time settings boil down to maximizing an objective of the quantile function of the decision variable. This quantile optimization problem is known as the quantile formulation of the original…
Several methods have been proposed in the literature to solve reliability-based optimization problems, where failure probabilities are design constraints. However, few methods address the problem of life-cycle cost or risk optimization,…
We study an agent's lifecycle portfolio choice problem with stochastic labor income, borrowing constraints and a finite retirement date. Similarly to arXiv:2002.00201, wages evolve in a path-dependent way, but the presence of a finite…
A nonlinear algebraic equation system of two variables is numerically solved, which is derived from a nonlinear algebraic equation system of four variables, that corresponds to a mathematical model related to investment under conditions of…
This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
The paper develops multiplicative compensation for complex-valued semimartingales and studies some of its consequences. It is shown that the stochastic exponential of any complex-valued semimartingale with independent increments becomes a…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
Extended cure survival models enable to separate covariates that affect the probability of an event (or `long-term' survival) from those only affecting the event timing (or `short-term' survival). We propose to generalize the bounded…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Many engineering and physiological applications deal with situations when a fluid is moving in flexible tubes with elastic walls. In the real-life applications like blood flow, there is often an additional complexity of vorticity being…
In this paper we study a principal-agent problem in continuous time with multiple lump-sum payments (contracts) paid at different deterministic times. We reduce the non-zero sum Stackelberg game between the principal and agent to a standard…