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...

We propose new neighbouring prediction models for mortality forecasting. For each mortality rate at age x in year t, denoted as mx,t, we construct images of neighbourhood mortality data around mx,t, i.e., ℇmx,t (x1, x2, s), which includes mortality information for ages in [x − x1, x + x2],...

In the past decade, cyber insurance has raised much interest in the insurance industry, and cyber risk has evolved from a type of pure operational risk to both operational and liability risk for insurers. However, the modeling of cyber risk is still in its infancy. Compared with other insurance...

In this paper we propose a flexible framework for the design of weather index insurance (WII) based on penalized spline methods. The aim is to find the indemnity function which optimally characterizes the intricate relationship between agricultural production losses and weather variables and...

Tail risk measures such as Value at Risk (VaR) and Conditional Value at Risk (CVaR) are popularly accepted criteria for financial risk management, but are usually difficult to optimize. Especially for VaR, it generally leads to a non-convex NP-hard problem which is computationally challenging....

Weather risk affects agricultural production. Index insurance has been proposed to hedge against severe weather risk, but large basis risk and low demand accompany current piecewise-linear index insurance contracts. We propose embedding a neural network-based optimization scheme into an expected...

While the COVID-19 pandemic has shattered the world with severe human toll and catastrophic economic losses and sufferings, it has also heightened the need for more effective solutions for managing epidemic-related risks. In this paper, we pro- pose two capital market-based epidemic financing...