We consider the utility maximization problem for an investor who faces a solvency or risk constraint in addition to a budget constraint. The investor wishes to maximize her expected utility from terminal wealth subject to a bound on her expected solvency at maturity. We measure solvency using a...

Recent theoretical results establish that time-consistent valuations (i.e.pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial premium principles when such backward iteration procedures...

This paper reconsiders the predictions of the standard option pricing models in the context of incomplete markets. We relax the completeness assumption of the Black-Scholes (1973) model and as an immediate consequence we can no longer construct a replicating portfolio to price the option....

This paper reconsiders the predictions of the standard option pricing models in the context of incomplete markets. We relax the completeness assumption of the Black-Scholes (1973) model and as an immediate consequence we can no longer construct a replicating portfolio to price the option....

This paper compares the UK and Dutch occupational defined-benefit pension policies using the holistic balance sheet (HBS) framework. The UK DB pension system differs from the Dutch one in terms of the steering tools and adjustment mechanisms. In addition to the sponsor guarantee, the UK system...

Many problems in financial engineering involve the estimation of unknown conditional expectations across a time interval. Often Least Squares Monte Carlo techniques are used for the estimation. One method that can be combined with Least Squares Monte Carlo is the "Regress-Later" method. Unlike...

This paper deals with the numerical approximation of the class of Markovian backward stochastic differential equations (BSDEs) where the terminal condition is a functional of Brownian motion. By developing the solution of a Markovian BSDE as a Fourier-Hermite expansions in a Hilbert space, we...

This technical note gives implementation notes for estimating the Koijen-Nijman-Werker model from historical data based on a Kalman filter. We provide an independent derivation of the KNW model. We propose a different implementation of the state-space formulation of the KNW model and we test the...

Traditional ALM first sets the policy parameters and then assesses the impact on some sub-set of risk and return measures. We propose a method to ‘invert' the traditional ALM approach: first formulate the desired level of risk and return measures and then systematically search through the...

This paper defines an approximation to the value of funding ratio put options for pension funds. This option is, by construction, the ideal option to hedge the risk of a funding ratio falling below some required minimum level. It's value can be used for several applications, for example as a...