Related papers: Tractable bank capital structure: optimal control …
This paper studies the optimal dividend for a multi-line insurance group, in which each subsidiary runs a product line and is exposed to some external credit risk. The default contagion is considered such that one default event may increase…
In this paper, we consider a class of stochastic optimal control problems with risk constraints that are expressed as bounded probabilities of failure for particular initial states. We present here a martingale approach that diffuses a risk…
Schr\"{o}dinger bridge can be viewed as a continuous-time stochastic control problem where the goal is to find an optimally controlled diffusion process whose terminal distribution coincides with a pre-specified target distribution. We…
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…
This paper investigates an optimal investment problem under the tail Value at Risk (tail VaR, also known as expected shortfall, conditional VaR, average VaR) and portfolio insurance constraints confronted by a defined-contribution pension…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
We consider a portfolio optimisation problem for a utility-maximising investor who faces convex constraints on his portfolio allocation in Heston's stochastic volatility model. We apply the duality methods developed in previous work to…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
We study the problem of asset liquidation in financial systems. During financial crises, asset liquidation is often inevitable but can lead to substantial losses if a significant amount of illiquid assets are sold simultaneously at…
This paper extends the utility maximization literature by combining partial information and (robust) regulatory constraints. Partial information is characterized by the fact that the stock price itself is observable by the optimizing…
We characterize the optimal control for a class of singular stochastic control problems as the unique solution to a related Skorokhod reflection problem. The considered optimization problems concern the minimization of a discounted cost…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
This paper studies the finite horizon portfolio management by optimally tracking a ratcheting capital benchmark process. It is assumed that the fund manager can dynamically inject capital into the portfolio account such that the total…
This paper focuses on stochastic optimal control problems with constraints in law, which are rewritten as optimization (minimization) of probability measures problem on the canonical space. We introduce a penalized version of this type of…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
We study a linear-quadratic, optimal control problem on a discrete, finite time horizon with distributional ambiguity, in which the cost is assessed via Conditional Value-at-Risk (CVaR). We take steps toward deriving a scalable dynamic…
Motivated by a new formulation of the classical dividend problem, we show that Peskir's maximality principle can be transferred to singular stochastic control problems with 2-dimensional degenerate dynamics and absorption along the diagonal…
We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…
This paper is concerned with an optimal reinsurance and investment problem for an insurance firm under the criterion of mean-variance. The driving Brownian motion and the rate in return of the risky asset price dynamic equation cannot be…