The present paper studies time-consistent solutions to an investment-reinsurance problem under a mean-variance framework. The paper is distinguished from other literature by taking into account the interests of both an insurer and a reinsurer jointly. The claim process of the insurer is governed...

Vine copula provides a flexible tool to capture asymmetry in modelling multivariate distributions. Nevertheless, its flexibility is achieved at the expense of exponentially increasing complexity of the model. To alleviate this issue, the simplifying assumption (SA) is commonly adapted in...

This paper starts from examining the performance of equally weighted 1/N stock portfolios over time. During the last four decades these portfolios outperformed the market. The construction of these portfolios implies that their constituent stocks are in general older than those in the market as...

This paper studies the performance of discrete-time constant proportional portfolio insurance (CPPI) under proportional trading cost and regime switching. Explicit formulas are developed for a variety of measures for the performance of a CPPI portfolio, and a double-sided Laplace inversion...

Hedging is one of the most important topics in finance. When a financial market is complete, every contingent claim can be hedged perfectly to eliminate any potential future obligations. When the financial market is incomplete, the investor may eliminate his risk exposure by superhedging. In...

A number of optimal decision problems with uncertainty can be formulated into a stochastic optimal control framework. The Least-Squares Monte Carlo (LSMC) algorithm is a popular numerical method to approach solutions of such stochastic control problems as analytical solutions are not tractable...

We propose a "1/N favorability index" to measure how favorable a market is to holding a 1/N portfolio. This index reflects the extent of difficulty for an optimized portfolio to outperform the 1/N portfolio in a specific market. A single-factor model predicts that bull markets are accompanied by...

In this paper, we consider the problem of optimal partial hedging for a contingent claim subject to a preset hedging budget constraint. Under some technical assumptions on the hedged loss function and the market pricing functional, the optimal partial hedging strategy, which minimizes the...

Climate change becomes a common threat to the world and has been studied by scholars in various fields. In the field of finance, many papers discuss the financial market efficiency toward climate change in order to better manage related risk. Our work focuses on the topic of climate change risk...

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...