Related papers: When is truncated stop loss optimal?
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
The risk-neutral LQR controller is optimal for stochastic linear dynamical systems. However, the classical optimal controller performs inefficiently in the presence of low-probability yet statistically significant (risky) events. The…
We study the properties of Expected Shortfall from the point of view of financial risk management. This measure --- which emerges as a natural remedy in some cases where Value at Risk (VaR) is not able to distinguish portfolios which bear…
In this paper, we consider the problem of optimal reinsurance design, when the risk is measured by a distortion risk measure and the premium is given by a distortion risk premium. First, we show how the optimal reinsurance design for the…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
Multistage risk-averse optimal control problems with nested conditional risk mappings are gaining popularity in various application domains. Risk-averse formulations interpolate between the classical expectation-based stochastic and minimax…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We develop a formalism for insurance profit optimisation for the in-force business constraint by regulatory and risk policy related requirements. This approach is applicable to Life, P&C and Reinsurance businesses and applies in all…
This paper proposes a safety analysis method that facilitates a tunable balance between the worst-case and risk-neutral perspectives. First, we define a risk-sensitive safe set to specify the degree of safety attained by a stochastic…
We consider a diffusion risk model where proportional reinsurance can be bought. In order to stabilise the surplus process, one tries to keep the drawdown, that is the difference of the surplus to its historical maximum, in an interval…
The geology of oil reservoirs is largely unknown. Consequently, the reservoir models used for production optimization are subject to significant uncertainty. To minimize the associated risk, the oil literature has mainly used ensemble-based…
Conditional Value at Risk (CVaR) is a prominent risk measure that is being used extensively in various domains. We develop a new formula for the gradient of the CVaR in the form of a conditional expectation. Based on this formula, we…
This paper is the continuation of "Pricing with coherent risk" and deals with further applications of coherent risk measures to problems of finance. First, we study the optimization problem. Three forms of this problem are considered.…
We study issues of robustness in the context of Quantitative Risk Management and Optimization. We develop a general methodology for determining whether a given risk measurement related optimization problem is robust, which we call…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
Recently some papers, such as Aban, Meerschaert and Panorska (2006), Nuyts (2010) and Clark (2013), have drawn attention to possible truncation in Pareto tail modelling. Sometimes natural upper bounds exist that truncate the probability…
Balancing safety and efficiency when planning in crowded scenarios with uncertain dynamics is challenging where it is imperative to accomplish the robot's mission without incurring any safety violations. Typically, chance constraints are…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
Connected and automated vehicles (CAVs) provide the most intriguing opportunity to reduce pollution, energy consumption, and travel delays. In earlier work, we addressed the optimal coordination of CAVs using Hamiltonian analysis. In this…
In this paper we present an enhancement of the regression-based variance reduction approaches recently proposed in Belomestny et al. This enhancement is based on a truncation of the control variate and allows for a significant reduction of…