Related papers: Insurance-Finance Arbitrage
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
We study the design of an optimal insurance contract in which the insured maximizes her expected utility and the insurer limits the variance of his risk exposure while maintaining the principle of indemnity and charging the premium…
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…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
The option is a financial derivative, which is regularly employed in reducing the risk of its underlying securities. However, investing in option is still risky. Such risk becomes much severer for speculators who utilize option as a means…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…
In this paper we investigate discrete time trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…
In this paper we propose a general framework for modeling an insurance liability cash flow in continuous time, by generalizing the reduced-form framework for credit risk and life insurance. In particular, we assume a nontrivial dependence…
We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We assume the limited capital for hedging and we provide with the best strategy for an insurance company in the meaning of so…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…