Related papers: Pareto models for risk management

Importance weighting is a general way to adjust Monte Carlo integration to account for draws from the wrong distribution, but the resulting estimate can be highly variable when the importance ratios have a heavy right tail. This routinely…

Employing profits data of Japanese companies in 2002 and 2003, we confirm that Pareto's law and the Pareto index are derived from the law of detailed balance and Gibrat's law. The last two laws are observed beyond the region where Pareto's…

In risk management, often the probability must be estimated that a random vector falls into an extreme failure set. In the framework of bivariate extreme value theory, we construct an estimator for such failure probabilities and analyze its…

This paper develops a Pareto scale-inflated outlier model. This model is intended for use when data from some standard Pareto distribution of interest is suspected to have been contaminated with a relatively small number of outliers from a…

High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…

Risk management is particularly concerned with extreme events, but analysing these events is often hindered by the scarcity of data, especially in a multivariate context. This data scarcity complicates risk management efforts. Various tools…

We present novel mathematical models for inventory management within a reverse logistics system. Technological advancements, sustainability initiatives, and evolving customer behaviours have significantly increased the demand for repaired…

In order to study the phenomenon in detail that income distribution follows Pareto law, we analyze the database of high income companies in Japan. We find a quantitative relation between the average capital of the companies and the Pareto…

We discuss the use of saddlepoint methods in the analysis of portfolios, with particular reference to credit portfolios. The objective is to proceed from a model of the loss distribution, given through probabilities, correlations and the…

This paper considers the problem of forecasting mortality rates. A large number of models have already been proposed for this task, but they generally have the disadvantage of either estimating the model in a two-step process, possibly…

In statistical decision theory, a model is said to be Pareto optimal (or admissible) if no other model carries less risk for at least one state of nature while presenting no more risk for others. How can you rationally aggregate/combine a…

A model of distribution of the wealth in a society based on the properties of complex networks has been proposed. The wealth is interpreted as a consequence of communication possibilities and proportional to the number of connections…

The dual risk model is a popular model in finance and insurance, which is often used to model the wealth process of a venture capital or high tech company. Optimal dividends have been extensively studied in the literature for a dual risk…

In recent years research on credit risk modelling has mainly focused on default probabilities. Recovery rates are usually modelled independently, quite often they are even assumed constant. Then, however, the structural connection between…

Parametric insurance has emerged as a practical way to cover risks that may be difficult to assess. By introducing a parameter that triggers compensation and allows the insurer to determine a payment without estimating the actual loss,…

In many real-world applications, the Pareto Set (PS) of a continuous multiobjective optimization problem can be a piecewise continuous manifold. A decision maker may want to find a solution set that approximates a small part of the PS and…

We propose to interpret distribution model risk as sensitivity of expected loss to changes in the risk factor distribution, and to measure the distribution model risk of a portfolio by the maximum expected loss over a set of plausible…

In this paper we develop a novel inferential approach based on geometric records for estimating the tail index of heavy-tailed distributions. We construct a maximum likelihood estimator for the Pareto model and establish its strong…

In this paper a quantitative analysis of the ruin probability in finite time of discrete risk process with proportional reinsurance and investment of finance surplus is focused on. It is assumed that the total loss on a unit interval has a…

Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…