Traditional participating life insurance contracts with year-to-year (cliquet-style) guarantees have come under pressure in the current situation of low interest rates and volatile capital markets, in particular when priced in a market-consistent valuation framework. In addition, such guarantees...

We study risk-minimization for a large class of insurance contracts. Given that the individual progress in time of visiting an insurance policy's states follows an F-doubly stochastic Markov chain, we describe different state-dependent types of insurance benefits. These cover single payments at...

We study a portfolio selection problem in a continuous-time Itô–Markov additive market with prices of financial assets described by Markov additive processes that combine Lévy processes and regime switching models. Thus, the model takes into account two sources of risk: the jump diffusion...

This paper studies the optimal investment and consumption strategies in a two-asset model. A dynamic Value-at-Risk constraint is imposed to manage the wealth process. By using Value at Risk as the risk measure during the investment horizon, the decision maker can dynamically monitor the exposed...

Life Insurance Retirement Plans (LIRPs) offer tax-deferred cash value accumulation, tax-free withdrawals (if properly structured), and a tax-free death benefit to beneficiaries. Thus, LIRPs share many of the tax advantages of other retirement savings vehicles but with less restrictive...

One of the main challenges investors have to face is model uncertainty. Typically, the dynamic of the assets is modeled using two parameters: the drift vector and the covariance matrix, which are both uncertain. Since the variance/covariance parameter is assumed to be estimated with a certain...

This is Part III of a series of papers which focus on a general framework for portfolio theory. Here, we extend a general framework for portfolio theory in a one-period financial market as introduced in Part I [Maier-Paape and Zhu, Risks 2018, 6(2), 53] to multi-period markets. This extension is...

Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...

The Growth-Optimal Portfolio (GOP) theory determines the path of bet sizes that maximize long-term wealth. This multi-horizon goal makes it more appealing among practitioners than myopic approaches, like Markowitz's mean-variance or risk parity. The GOP literature typically considers...

In this paper, the generalized Pareto distribution (GPD) copula approach is utilized to solve the conditional value-at-risk (CVaR) portfolio problem. Particularly, this approach used (i) copula to model the complete linear and non-linear correlation dependence structure, (ii) Pareto tails to...