We investigate optimal strategies for a constant absolute risk aversion (CARA) insurer to manage its business risk through not only equity investment and proportional reinsurance but also trading derivatives of the equity. We obtain the optimal strategies in closed-form and quantify the value of...

We consider a central bank strategy for maintaining a two-sided currency target zone, in which an exchange rate of two currencies is forced to stay between two thresholds. To keep the exchange rate from breaking the prescribed barriers, the central bank is generating permanent price impact and...

In this article, we study the problem of optimal index insurance design under an expected utility maximization framework. For general utility functions, we formally prove the existence and uniqueness of optimal contract, and develop an effective numerical procedure to calculate the optimal...