Related papers: The VAR at Risk
This paper studies Pareto-optimal reinsurance design in a monopolistic market with multiple primary insurers and a single reinsurer, all with heterogeneous risk preferences. The risk preferences are characterized by a family of risk…
Firms engaged in electronic commerce increasingly rely on predictive analytics via machine-learning algorithms to drive a wide array of managerial decisions. The tuning of many standard machine learning algorithms can be understood as…
The goal of this paper is to provide an insight into the equilibrium of the Internet market, when the current balance of the market is disrupted, and one of the ISPs switches to a non-neutral regime. We consider a content provider with a…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
We consider an investment problem in which an investor performs capital injections to increase the liquidity of a firm for it to maximise profit from market operations. Each time the investor performs an injection, the investor incurs a…
We generalize Merton's asset valuation approach to systems of multiple financial firms where cross-ownership of equities and liabilities is present. The liabilities, which may include debts and derivatives, can be of differing seniority. We…
We introduce a general decision tree framework to value an option to invest/divest in a project, focusing on the model risk inherent in the assumptions made by standard real option valuation methods. We examine how real option values depend…
The design and operation of protective systems is an essential engineering responsibility. Ensuring public safety, while essential, must be accomplished at a feasible cost and within government regulation. Hence, protective system design…
Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…
We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. Building on the theory on multiple-prior optimal stopping we propose a valuation functional with sound…
In practice, the value-at-risk (VaR) for a longer holding period is often scaled using the 'square root of time rule'. The VaR is determined for a shorter holding period and then scaled up according to the desired holding period. For…
We study a variant of the principal-agent problem in which the principal does not directly observe the agent's effort outcome; rather, she gets a signal about the agent's action according to a variable information structure designed by a…
Previous work suggests that the charter value hypothesis is theoretically grounded and empirically supported, but not universally. Accordingly, this paper aims to perform an analysis of the relations between charter value, risk taking, and…
The aim of this research is to give a simple framework to evaluate/quantize the "transparency" of a firm. We assume that the process of the firm value is only observable once in a while but is strongly correlated with the stock price which…
We analyze multiline pricing and capital allocation in equilibrium no-arbitrage markets. Existing theories often assume a perfect complete market, but when pricing is linear, there is no diversification benefit from risk pooling and…
Representatives of several Internet service providers (ISPs) have expressed their wish to see a substantial change in the pricing policies of the Internet. In particular, they would like to see content providers (CPs) pay for use of the…
The problem of data uncertainty has motivated the incorporation of robust optimization in various arenas, beyond the Markowitz portfolio optimization. This work presents the extension of the robust optimization framework for the…
Appropriate risk management is crucial to ensure the competitiveness of financial institutions and the stability of the economy. One widely used financial risk measure is Value-at-Risk (VaR). VaR estimates based on linear and parametric…
In economics, insurance and finance, value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets. For a given portfolio, time horizon, and probability $\alpha$, the $100\alpha\%$ VaR is…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…