Related papers: Contract Structure and Risk Aversion in Longevity …
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
The sensitivity to risk that most people (hence, financial operators) feel affects the dynamics of financial transactions. Here we present an approach to this problem based on a current generalization of Boltzmann-Gibbs statistical…
The stability analysis of socioeconomic systems has been centered on answering whether small perturbations when a system is in a given quantitative state will push the system permanently to a different quantitative state. However, typically…
We study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that instability can be used to secure longer-term durable changes, even if it is costly to generate and…
This paper studies optimal investment from the point of view of an investor with longevity-linked liabilities. The relevant optimization problems rarely are analytically tractable, but we are able to show numerically that liability driven…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
This paper investigates dynamic and static fund separations and their stability for long-term optimal investments under three model classes. An investor maximizes the expected utility with constant relative risk aversion under an incomplete…
We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear.…
We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent privately knows his ability that determines his cost of effort. We show that linear contracts admit approximation…
Contracts and contract monitoring are a powerful mechanism for specifying properties and guaranteeing them at run time. However, run time monitoring of contracts imposes a significant overhead. The execution time is impacted by the…
This paper introduces assume/guarantee contracts on continuous-time control systems, hereby extending contract theories for discrete systems to certain new model classes and specifications. Contracts are regarded as formal characterizations…
The global markets provide enterprises with selling opportunities and challenges in stabilizing operational strategies. From the perspective of production management, it is important to improve the profitability of an enterprise by…
Many systems contain latent variables that make their dynamics partially unidentifiable or cause distribution shifts in the observed statistics between offline and online data. However, existing control techniques often assume access to…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…