Related papers: Multiple-prior valuation of cash flows subject to …
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…
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…
This paper is motivated by computational challenges arising in multi-period valuation in insurance. Aggregate insurance liability cashflows typically correspond to stochastic payments several years into the future. However, insurance…
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…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
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…
Firms should keep capital to offer sufficient protection against the risks they are facing. In the insurance context methods have been developed to determine the minimum capital level required, but less so in the context of firms with…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
We introduce capital flow constraints, loss of good will and loan to the lot sizing problem. Capital flow constraint is different from traditional capacity constraints: when a manufacturer launches production, its present capital should not…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…
The optimal stopping problem for the risk process with interests rates and when claims are covered immediately is considered. An insurance company receives premiums and pays out claims which have occured according to a renewal process and…
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs…
This paper sets out a framework for the valuation of insurance liabilities that is intended to be economically realistic, elementary, reasonably practically applicable, and as a special case to provide a basis for the valuation in…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
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…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
In the present paper, the primal-dual problem consisting of the investment risk minimization problem and the expected return maximization problem in the mean-variance model is discussed using replica analysis. As a natural extension of the…