The goal of this paper is to investigate (locally) risk-minimizing hedging strategies under the benchmark approach in a financial semimartingale market model where there are restrictions on the available information. More precisely, we characterize the optimal strategy as the integrand appearing...

Recent events in the financial and insurance markets, as well as the looming challenges of a globally changing climate point to the need to re-think the ways in which we measure and manage catastrophic and dependent risks. Management can only be as good as our measurement tools. To that end,...

We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers,...

We investigate the valuation and hedging of catastrophe options, whose claim arrival process is modeled by the Cox process or a doubly stochastic Poisson process. Employing the non-arbitrage principle we obtain closed form formula for the pricing of the option. Various hedging parameters are...

Systematic improvements in mortality results in dependence in the survival distributions of insured lives. This is not allowed for in standard life tables and actuarial models used for annuity pricing and reserving. Systematic longevity risk also undermines the law of large numbers; a law that...

This paper examines the multi-scale relationship between the interest rate, exchange rate and stock price using a wavelet transform. In particular, we apply the maximum overlap discrete wavelet transform (MODWT) to the interest rate, exchange rate and stock price in US over the period from...

The paper provides natural hedging strategies among death benefits and annuities written on a single and on different generations. It obtains closed-form Delta and Gamma hedges, in the presence of both longevity and interest rate risk. We present an application to UK data on survivorship and...

The proof of the theorem of existence of the ruptures, namely the proof of maximality, is improved. The theorem may be used in economics and explain the well-known problems such as Allais’ paradox. Illustrated examples of ruptures are presented.

The article is devoted to data dispersion in economics. The state of the art and the problems of the utility theory are briefly reviewed. Examples of typical paradoxes, which are analyzed by the utility theory, are given. Analogous paradoxes may concern problems such as the underweighting of...

We consider a Heston type inflation model in combination with a Hull–White model for nominal and real interest rates, in which all the correlations can be non-zero. Due to the presence of the Heston dynamics our derived inflation model is able to capture the implied volatility skew/smile,...