Related papers: Tractable bank capital structure: optimal control …

We consider de Finetti's problem for spectrally one-sided L\'evy risk models with control strategies that are absolutely continuous with respect to the Lebesgue measure. Furthermore, we consider the version with a constraint on the time of…

We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…

Accurate modeling of operational risk is important for a bank and the finance industry as a whole to prepare for potentially catastrophic losses. One approach to modeling operational is the loss distribution approach, which requires a bank…

We derive the explicit solutions to singular stochastic control problems of the monotone follower type with (a) an expected discounted criterion, (b) an expected ergodic criterion and (c) a pathwise ergodic criterion. These problems have…

We consider a classical stochastic control problem in which a diffusion process is controlled by a withdrawal process up to a termination time. The objective is to maximize the expected discounted value of the withdrawals until the…

Voltage control plays an important role in the operation of electricity distribution networks, especially with high penetration of distributed energy resources. These resources introduce significant and fast varying uncertainties. In this…

Asset management attempts to keep the power system in working conditions. It requires much coordination between multiple entities and long term planning often months in advance. In this work we introduce a mid-term asset management…

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…

In this paper, as a first step in examining the properties of a feasible portfolio subset that is characterized by budget and risk constraints, we assess the maximum and minimum of the investment concentration using replica analysis. To do…

This paper develops numerical methods for finding optimal dividend pay-out and reinsurance policies. A generalized singular control formulation of surplus and discounted payoff function are introduced, where the surplus is modeled by a…

Banking system crises are complex events that in a short span of time can inflict extensive damage to banks themselves and to the external economy. The crisis literature has so far identified a number of distinct effects or channels that…

Regulatory requirements dictate that financial institutions must calculate risk capital (funds that must be retained to cover future losses) at least annually. Procedures for doing this have been well-established for many years, but recent…

We model the trading activity between a broker and her clients (informed and uninformed traders) as an infinite-horizon stochastic control problem. We derive the broker's optimal dealing strategy in closed form and use this to introduce an…

In this paper we consider a company whose assets and liabilities evolve according to a correlated bivariate geometric Brownian motion, such as in Gerber and Shiu (2003). We determine what dividend strategy maximises the expected present…

In this paper we present a dynamic programing approach to stochastic optimal control problems with dynamic, time-consistent risk constraints. Constrained stochastic optimal control problems, which naturally arise when one has to consider…

Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…

This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…

The banking systems that deal with risk management depend on underlying risk measures. Following the Basel II accord, there are two separate methods by which banks may determine their capital requirement. The Value at Risk measure plays an…

This paper studies the bank dynamic decision problem in the intermediate time step for a discrete-time setup. We have considered a three-time-step model. Initially, the banks raise money through debt and equity and invest in different types…

To quantify an operational risk capital charge under Basel II, many banks adopt a Loss Distribution Approach. Under this approach, quantification of the frequency and severity distributions of operational risk involves the bank's internal…