Related papers: On the minimization of operational risks
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…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We survey systemic risks to financial markets and present a high-level description of an algorithm that measures systemic risk in terms of coupled networks.
We propose a dynamical model for the estimation of Operational Risk in banking institutions. Operational Risk is the risk that a financial loss occurs as the result of failed processes. Examples of operational losses are the ones generated…
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…
We consider the optimal investment problem for Black-Scholes type financial market with bounded VaR measure on the whole investment interval $[0,T]$. The explicit form for the optimal strategies is found.
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
The question addressed in this paper is the performance of the optimal strategy, and the impact of partial information. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable…
We study the effect of investor inertia on stock price fluctuations with a market microstructure model comprising many small investors who are inactive most of the time. It turns out that semi-Markov processes are tailor made for modelling…
Funding is a cost to trading desks that they see as an input. Current FVA-related literature reflects this by also taking funding costs as an input, usually constant, and always risk-neutral. However, this funding curve is the output from a…
The optimal allocation of assets has been widely discussed with the theoretical analysis of risk measures, and pessimism is one of the most attractive approaches beyond the conventional optimal portfolio model. The $\alpha$-risk plays a…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
In this research, starting from a widely accepted definition of risk, we support the idea that risk reduction is a more realistic objective than risk minimization, which represents a theoretical utopia. Furthermore, significant risk…
We consider a financial market model with a single risky asset whose price process evolves according to a general jump-diffusion with locally bounded coefficients and where market participants have only access to a partial information flow.…
We reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…
This paper is intended to explain, in simple terms, some of the mechanisms and agents common to multiagent financial market simulations. We first discuss the necessity to include an exogenous price time series ("the fundamental value") for…
We address the problem of optimal Central Bank intervention in the exchange rate market when interventions create feedback in the rate dynamics. In particular, we extend the work done on optimal impulse control by Cadenillas and Zapatero to…
Minimizing risk with fairness constraints is one of the popular approaches to learning a fair classifier. Recent works showed that this approach yields an unfair classifier if the training set is corrupted. In this work, we study the…