Related papers: Optimal reinsurance design under solvency constrai…
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…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
We develop a cutting-plane methodology that adjusts solutions to optimization problems so as to reduce features that bring about exposure to risk, such as concentration of assets or resources. The methodology is agnostic to the…
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…
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…
Consider two insurance companies (or two branches of the same company) that receive premiums at different rates and then split the amount they pay in fixed proportions for each claim (for simplicity we assume that they are equal). We model…
We consider the valuation problem of an (insurance) company under partial information. Therefore we use the concept of maximizing discounted future dividend payments. The firm value process is described by a diffusion model with constant…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
In this paper, we investigate the optimization of mutual proportional reinsurance --- a mutual reserve system that is intended for the collective reinsurance needs of homogeneous mutual members, such as P&I Clubs in marine mutual insurance…
In this paper, we study the optimal control problem for a company whose surplus process evolves as an upward jump diffusion with random return on investment. Three types of practical optimization problems faced by a company that can control…
In this paper we consider some insurance policies related to drawdown and drawup events of log-returns for an underlying asset modeled by a spectrally negative geometric L\'evy process. We consider four contracts, three of which were…
This paper examines a Markovian model for the optimal irreversible investment problem of a firm aiming at minimizing total expected costs of production. We model market uncertainty and the cost of investment per unit of production capacity…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
We consider the problem of minimizing the probability of ruin by purchasing reinsurance whose premium is computed according to the mean-variance premium principle, a combination of the expected-value and variance premium principles. We…
We study Stackelberg Equilibria (Bowley optima) in a monopolistic centralized sequential-move insurance market, with a profit-maximizing insurer who sets premia using a distortion premium principle, and a single policyholder who seeks to…
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…
This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
We discuss the portfolio optimization problem with the obligatory deposits constraint. Recently it has been shown that as a consequence of this nonlinear constraint, the solution consists of an exponentially large number of optimal…