Related papers: Robust asymptotic insurance-finance arbitrage
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
We introduce a novel framework to account for sensitivity to rewards uncertainty in sequential decision-making problems. While risk-sensitive formulations for Markov decision processes studied so far focus on the distribution of the…
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…
We study strategic interaction in data-driven games where players face uncertainty about payoff distributions inferred from finite samples. To model calibrated attitudes toward such uncertainty, we formulate distributionally robust games…
The new framework for finance is proposed. This framework based on three known approaches in econophysics. Assumptions of the framework are the following: 1. For the majority of situations market follows non-arbitrage condition. 2. For the…
Despite decades of research and recent progress in adaptive control and reinforcement learning, there remains a fundamental lack of understanding in designing controllers that provide robustness to inherent non-asymptotic uncertainties…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
Various members of the class of weighted insurance premiums and risk capital allocation rules have been researched from a number of perspectives. Corresponding formulas in the case of parametric families of distributions have been derived,…
This paper resolves a question proposed in Kardaras and Robertson [Ann. Appl. Probab. 22 (2012) 1576-1610]: how to invest in a robust growth-optimal way in a market where precise knowledge of the covariance structure of the underlying…
This paper focuses on a discrete-time risk model in which both insurance risk and financial risk are taken into account. We study the asymptotic behaviour of the ruin probability and the tail probability of the aggregate risk amount.…
Parametric insurance contracts translate index measurements to compensation for policyholders' losses using predefined payment schemes. These need to be designed carefully to keep basis risk, i.e. the disparity between payouts and true…
We study risk measures $\varphi:E\longrightarrow\mathbb{R}\cup\{\infty\}$, where $E$ is a vector space of random variables which a priori has no lattice structure$\unicode{x2014}$a blind spot of the existing risk measures literature. In…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
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…
CoVaR (conditional value-at-risk) is a crucial measure for assessing financial systemic risk, which is defined as a conditional quantile of a random variable, conditioned on other random variables reaching specific quantiles. It enables the…
In this paper, we investigate the robust optimal reinsurance,investment,and internal surplus distribution (i.e., consumption) problem for an insurer with Epstein-Zin recursive preferences in an incomplete market. It is assumed that the…
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
We revisit the problem of designing strategyproof mechanisms for allocating divisible items among two agents who have linear utilities, where payments are disallowed and there is no prior information on the agents' preferences. The…