2019 March - 34 articles
We study a portfolio selection problem in a continuous-time Itô–Markov additive market with prices of financial assets described by Markov additive processes that combine Lévy processes and regime switching models. Thus, the model...
In the field of mortality, the Lee–Carter based approach can be considered the milestone to forecast mortality rates among stochastic models. We could define a “Lee–Carter model family” that embraces all developments of this m...
This paper studies the optimal investment and consumption strategies in a two-asset model. A dynamic Value-at-Risk constraint is imposed to manage the wealth process. By using Value at Risk as the risk measure during the investment horizon, the decis...
Value at Risk (VaR) is used to illustrate the maximum potential loss under a given confidence level, and is just a single indicator to evaluate risk ignoring any information about income. The present paper will generalize one-dimensional VaR to two-d...
This paper explores the stochastic collocation technique, applied on a monotonic spline, as an arbitrage-free and model-free interpolation of implied volatilities. We explore various spline formulations, including B-spline representations. We explain...
In this paper, we develop a contingent claim model to evaluate the equity, default risk, and efficiency gain/loss from managerial overconfidence of a shadow-banking life insurer under the purchases of distressed assets by the government. Our paper fo...
There is an increasing influence of machine learning in business applications, with many solutions already implemented and many more being explored. Since the global financial crisis, risk management in banks has gained more prominence, and there has...
We introduce a financial stress index that was developed by the Office of Financial Research (OFR FSI) and detail its purpose, construction, interpretation, and use in financial market monitoring. The index employs a novel and flexible methodology us...
Estimation of future mortality rates still plays a central role among life insurers in pricing their products and managing longevity risk. In the literature on mortality modeling, a wide number of stochastic models have been proposed, most of them fo...
In this paper, we propose a credible regression approach with random coefficients to model and forecast the mortality dynamics of a given population with limited data. Age-specific mortality rates are modelled and extrapolation methods are utilized t...
Risk management is a comparatively new field and there is no core system of risk management in the construction industries of developing countries. In Pakistan, construction is an extremely risk-seeking industry lacking a good reputation for handling...
Determining distributions of the functions of random variables is one of the most important problems in statistics and applied mathematics because distributions of functions have wide range of applications in numerous areas in economics, finance, ris...
The management of National Social Security Systems is being challenged more and more by the rapid ageing of the population, especially in the industrialized countries. In order to chase the Pension System sustainability, several countries in Europe a...
Extrapolative methods are one of the most commonly-adopted forecasting approaches in the literature on projecting future mortality rates. It can be argued that there are two types of mortality models using this approach. The first extracts patterns i...
This study examines the effect of market risk on the financial performance of 31 non-financial companies listed on the Casablanca Stock Exchange (CSE) over the period 2000–2016. We utilized three alternative variables to assess financial perfor...
Based on a rich dataset of recoveries donated by a debt collection business, recovery rates for non-performing loans taken from a single European country are modelled using linear regression, linear regression with Lasso, beta regression and inflated...
As is well-known, the benefit of restricting Lévy processes without positive jumps is the “
Phase-type (PH) distributions are defined as distributions of lifetimes of finite continuous-time Markov processes. Their traditional applications are in queueing, insurance risk, and reliability, but more recently, also in finance and, though to a l...
This paper proposes a data-driven approach, by means of an Artificial Neural Network (ANN), to value financial options and to calculate implied volatilities with the aim of accelerating the corresponding numerical methods. With ANNs being universal f...
‘Sustainable investment’—includes a variety of asset classes selected while caring for the causes of environmental, social, and governance (ESG). It is an investment strategy that seeks to combine social and/ or environmental benefi...
Standardized longevity risk transfers often involve modeling mortality rates of multiple populations. Some researchers have found that mortality indexes of selected countries are cointegrated, meaning that a linear relationship exists between the ind...
We consider the optimal bail-out dividend problem with fixed transaction cost for a Lévy risk model with a constraint on the expected present value of injected capital. To solve this problem, we first consider the optimal bail-out dividend pro...
Risk perception is an idiosyncratic process of interpretation. It is a highly personal process of making a decision based on an individual’s frame of reference that has evolved over time. The purpose of this paper is to find out the risk percep...
In this paper, we suggest a Bayesian multivariate approach for pricing a reverse mortgage, allowing for house price risk, interest rate risk and longevity risk. We adopt the principle of maximum entropy in risk-neutralisation of these three risk comp...
In this paper, we employ 99% intraday value-at-risk (VaR) and intraday expected shortfall (ES) as risk metrics to assess the competency of the Multiplicative Component Generalised Autoregressive Heteroskedasticity (MC-GARCH) models based on the 1-min...
Life Insurance Retirement Plans (LIRPs) offer tax-deferred cash value accumulation, tax-free withdrawals (if properly structured), and a tax-free death benefit to beneficiaries. Thus, LIRPs share many of the tax advantages of other retirement savings...
We use Object Oriented Bayesian Networks (OOBNs) to analyze complex ties in the equity market and to detect drivers for the Standard & Poor’s 500 (S&P 500) index. To such aim, we consider a vast number of indicators drawn from various i...
The aim of this project is to analyze high-frequency GPS location data (second per second) of individual car drivers (and trips). We extract feature information about speeds, acceleration, deceleration, and changes of direction from this high-frequen...
We use the theory of coherent measures to look at the problem of surplus sharing in an insurance business. The surplus share of an insured is calculated by the surplus premium in the contract. The theory of coherent risk measures and the resulting ca...
One of the main challenges investors have to face is model uncertainty. Typically, the dynamic of the assets is modeled using two parameters: the drift vector and the covariance matrix, which are both uncertain. Since the variance/covariance paramete...
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We propose a statistical measure, based on correlation networks, to evaluate the systemic risk that could arise from the resolution of a failing or likely-to-fail financial institution, under three alternative scenarios: liquidation, private recapita...
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap for a life annuity portfolio. Although longevity swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as...
This paper explores the use of neural networks to reduce the computational cost of pricing and hedging variable annuity guarantees. Pricing these guarantees can take a considerable amount of time because of the large number of Monte Carlo simulations...
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