In this paper, we employ the theory of real option pricing to address problems in the area of operational risk management. Particularly, we develop a two-stage model to help firms determine the optimal suspension-reactivation triggers in the events of pandemics. In the first stage, we propose a...

This paper presents a universal framework for pricing financial andinsurance risks. Examples are given for pricing contingent payoffs, wherethe underlying asset or loss can be either traded or not traded....

Bug bounty program is a business activity in which firms invite white-hat hackers around the world to identify vulnerabilities in their cyber systems. The paper proposes a model to quantify the normal cybersecurity spending with respect to the importance of information systems. An upper limit of...

The paper discusses how to assess risk by computing the best upper and lower bounds on the expected value E[φ(X)], subject to the constraints E[Xⁱ] = µ_i for i = 0, 1, 2, . . . , n. φ(x) can take the form of the indicator function φ(x) = 𝕀_(−∞,K](x) in which the bounds on Pr(X ≤ K)...

There has been a surge of interest in recent years from defined benefit pension plan sponsors in de-risking their plans with strategies such as “longevity hedges” and “pension buyouts” (Lin et al., 2015). While buyouts are attractive in terms of value creation, they are capital intensive...

We provide a new method, the “MV CVaR approach”, for managing unexpected mortality changes underlying annuities and life insurance. The MV CVaR approach optimizes the mean-variance tradeoff of an insurer's mortality portfolio, subject to constraints on downside risk. We apply the method of...