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Markowitz mean-variance portfolios with sample mean and covariance as input parameters feature numerous issues in practice. They perform poorly out of sample due to estimation error, they experience extreme weights together with high…
A variable annuity is an equity-linked financial product typically offered by insurance companies. The policyholder makes an upfront payment to the insurance company and, in return, the insurer is required to make a series of payments…
In order to model risk aversion in reinforcement learning, an emerging line of research adapts familiar algorithms to optimize coherent risk functionals, a class that includes conditional value-at-risk (CVaR). Because optimizing the…
Demographic changes increase the necessity to base the pension system more and more on the second and the third pillar, namely the occupational and private pension plans; this paper deals with Target Date Funds (TDFs), which are a typical…
Retirees who exhaust their savings while still alive are said to experience financial ruin. These savings are typically grown during the accumulation phase then spent during the retirement decumulation phase. Extensive research into…
The entropy regularization is inspired by information entropy from machine learning and the ideas of exploration and exploitation in reinforcement learning, which appears in the control problem to design an approximating algorithm for the…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…
In the property and casualty (P&C) insurance industry, reserves comprise most of a company's liabilities. These reserves are the best estimates made by actuaries for future unpaid claims. Notably, reserves for different lines of business…
We investigate multi-period mean-risk portfolio optimization for long-horizon Defined Contribution plans, focusing on buffered Probability of Exceedance (bPoE), a more intuitive, dollar-based alternative to Conditional Value-at-Risk (CVaR).…
Evidence shows that the labor participation rate of retirement age cohorts is non-negligible, and it is a widespread phenomenon globally. In the United States, the labor force participation rate for workers age 75 and older is projected to…
We propose a novel risk matrix to characterize the optimal portfolio choice of an investor with tail concerns. The diagonal of the matrix contains the Value-at-Risk of each asset in the portfolio and the off-diagonal the pairwise…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
This paper studies an optimal investment-reinsurance problem for an insurer (she) under the Cram\'er--Lundberg model with monotone mean--variance (MMV) criterion. At any time, the insurer can purchase reinsurance (or acquire new business)…
We study a fully funded, collective defined-contribution (DC) pension system with multiple overlapping generations. We investigate whether the welfare of participants can be improved by intergenerational risk sharing (IRS) implemented with…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…