Related papers: When is truncated stop loss optimal?
This paper considers an insurer with two collaborating business lines that must make three critical decisions: (1) dividend payout, (2) a combination of proportional and excess-of-loss reinsurance coverage, and (3) capital injection between…
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…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
This paper explores the implications of producing forecast distributions that are optimized according to scoring rules that are relevant to financial risk management. We assess the predictive performance of optimal forecasts from…
We study an optimal reinsurance problem under a diffusion risk model for an insurer who aims to minimize the probability of lifetime ruin. To rule out moral hazard issues, we only consider moral-hazard-free reinsurance contracts by imposing…
In this paper, we study an optimal excess-of-loss reinsurance and investment problem for an insurer in defaultable market. The insurer can buy reinsurance and invest in the following securities: a bank account, a risky asset with stochastic…
In a continuous-time setting where a risk-averse agent controls the drift of an output process driven by a Brownian motion, optimal contracts are linear in the terminal output; this result is well-known in a setting with moral hazard and…
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…
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…
In this paper the fractional trading ansatz of money management is reconsidered with special attention to chance and risk parts in the goal function of the related optimization problem. By changing the goal function with due regards to…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
We study an optimal dividend problem for an insurer who simultaneously controls investment weights in a financial market, liability ratio in the insurance business, and dividend payout rate. The insurer seeks an optimal strategy to maximize…
We investigate an optimal stopping problem for the expected value of a discounted payoff on a regime-switching geometric Brownian motion under two constraints on the possible stopping times: only at exogenous random times and only during a…
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…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We study a non-concave optimization problem in which a financial company maximizes the expected utility of the surplus under a risk-based regulatory constraint. For this problem, we consider four different prevalent risk constraints…
Stop-loss rules are often studied in the financial literature, but the stop-loss levels are seldom constructed systematically. In many papers, and indeed in practice as well, the level of the stops is too often set arbitrarily. Guided by…
This paper extends the utility maximization literature by combining partial information and (robust) regulatory constraints. Partial information is characterized by the fact that the stock price itself is observable by the optimizing…
This work investigates the finite-horizon optimal covariance steering problem for discrete-time linear systems subject to both additive and multiplicative uncertainties as well as state and input chance constraints. In particular, a…
We design the insurance contract when the insurer faces arson-type risks. The optimal contract must be manipulation-proof. It is therefore continuous, it has a bounded slope, and it satisfies the no-sabotage condition when arson-type…