This paper explores the application of contingent claims analysis (CCA) to two quot;hotquot; issues in life-cycle finance: (1) investing for retirement and (2) deciding when, if ever, to switch careers. Participants in individual retirement accounts do not have the time or the knowledge to make...

This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach...

Given two sets of random variables, how can one determine whether the former variables are more interdependent than the latter? This question is of major importance to economists, for example, in comparing how various policies affect systemic risk or income inequality. Moreover, correlation is...

In many economic applications involving comparisons of multivariate distributions, supermodularity of an objective function is a natural property for capturing a preference for greater interdependence. One multivariate distribution dominates another according to the supermodular stochastic...

We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

I assess how Basel III, Solvency II and the low interest rate environment will affect the financial connection between the bank and insurance sector by changing the funding patterns of banks as well as the investment strategies of life insurance companies. Especially for life insurance...

Orderings of interdependence among random variables are useful in many economic contexts, for example, in assessing ex post inequality under uncertainty; in comparing multidimensional inequality; in valuing portfolios of assets or insurance policies; and in assessing systemic risk. We explore...

A deferred annuity typically includes an option-like right for the policyholder. At the end of the deferment period, he may either choose to receive annuity payouts, calculated based on a mortality table agreed to at contract inception, or receive the accumulated capital as a lump sum....

In recent years within Insurance companies measures like RAROC (Risk Adjusted Return on Capital) have become more popular for Balance Sheet Management purposes. RAROC is a performance measure that quantifies the amount of return per unit of risk that can be obtained by a certain entity.Measures...