Related papers: Dynamic capital allocation rules via BSDEs: an axi…
The aim of this paper is to study an optimal stopping problem for dynamic risk measures induced by backward stochastic differential equations with jumps and delayed generator. Firstly, we connect the value function of this problem to…
This study introduces a dynamic investment framework to enhance portfolio management in volatile markets, offering clear advantages over traditional static strategies. Evaluates four conventional approaches : equal weighted, minimum…
Suppose you are a fund manager with \$100 million to deploy and two years to invest it. A deal comes across your desk that looks appealing but costs \$50 million -- half of your available capital. Should you take it, or wait for something…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
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…
In this paper we propose the notion of dynamic deviation measure, as a dynamic time-consistent extension of the (static) notion of deviation measure. To achieve time-consistency we require that a dynamic deviation measures satisfies a…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub additive axiom to…
Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environmental and social sustainability, i.e. environmental,…
We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and…
Motivated by liquidity risk in mathematical finance, D. Lacker introduced concentration inequalities for risk measures, i.e. upper bounds on the \emph{liquidity risk profile} of a financial loss. We derive these inequalities in the case of…
Capital allocation is a procedure used to assess the risk contributions of individual risk components to the total risk of a portfolio. While the conditional tail expectation (CTE)-based capital allocation is arguably the most popular…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
In this paper we present a theoretical framework for studying coherent acceptability indices in a dynamic setup. We study dynamic coherent acceptability indices and dynamic coherent risk measures, and we establish a duality between them. We…
Random allocation models used in clinical trials aid researchers in determining which of a particular treatment provides the best results by reducing bias between groups. Often however, this determination leaves researchers battling ethical…
We discuss a general dynamic replication approach to counterparty credit risk modeling. This leads to a fundamental jump-process backward stochastic differential equation (BSDE) for the credit risk adjusted portfolio value. We then reduce…
We build on the theory of capital requirements (CRs) to create a new framework for modeling dynamic risk preferences. The key question is how to evaluate the risk of a payoff stream sequentially as new information is revealed. In our model,…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
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…