Related papers: A Natural Hedging Framework for Longevity Risk wit…
We introduce a collective model for life insurance where the heterogeneity of each insured, including the health state, is modeled by a diffusion process. This model is influenced by concepts in statistical mechanics. Using the proposed…
This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality.…
The significance of mortality modeling extends across multiple research areas, ranging from life insurance valuation to optimal lifetime decision-making. Existing approaches, such as mortality laws and factor-based models, often fall short…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
We propose some machine-learning-based algorithms to solve hedging problems in incomplete markets. Sources of incompleteness cover illiquidity, untradable risk factors, discrete hedging dates and transaction costs. The proposed algorithms…
As generative AI systems, including large language models (LLMs) and diffusion models, advance rapidly, their growing adoption has led to new and complex security risks often overlooked in traditional AI risk assessment frameworks. This…
We provide a framework for detecting relevant insurance companies in a systemic risk perspective. Among the alternative methodologies for measuring systemic risk, we propose a complex network approach where insurers are linked to form a…
We reveal a geometric structure underlying both hedging and investment products. The structure follows from a simple formula expressing investment risks in terms of returns. This informs optimal product designs. Optimal pure hedging…
We propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the…
Models of adaptive bet-hedging commonly adopt insights from Kelly's famous work on optimal gambling strategies and the financial value of information. In particular, such models seek evolutionary solutions that maximize long term average…
This work studies the dynamic risk management of the risk-neutral value of the potential credit losses on a portfolio of derivatives. Sensitivities-based hedging of such liability is sub-optimal because of bid-ask costs, pricing models…
The availability of deep hedging has opened new horizons for solving hedging problems under a large variety of realistic market conditions. At the same time, any model - be it a traditional stochastic model or a market generator - is at…
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 clinical trials, hypotheses are frequently organized into hierarchically ordered families, requiring specialized testing strategies that account for these structured relationships. Existing gatekeeping methods-including serial, parallel,…
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
Empirical studies with publicly available life tables identify long-range dependence (LRD) in national mortality data. Although the longevity market is supposed to benchmark against the national force of mortality, insurers are more…
Measuring beliefs about natural disasters is challenging. Deep out-of-the-money options allow investors to hedge at a range of strikes and time horizons, thus the 3-dimensional surface of firm-level option prices provides information on (i)…
In this work, we present a numerical method based on a sparse grid approximation to compute the loss distribution of the balance sheet of a financial or an insurance company. We first describe, in a stylised way, the assets and liabilities…