Variable annuities (VAs) and other long-term equity-linked insurance products are typically difficult to hedge in the incomplete markets. A state-dependent fee tied with market volatility for VAs is designed to contribute the risk-sharing mechanism between policyholders and insurers. Different...

Pourbabaee, Kwak, and Pirvu (2016) determine the constant-mix strategy that minimizes Capital at Risk (CaR) under a negative correlation constraint with a benchmark. We extend their result to any increasing law invariant objective function without condition on the sign of the correlation. In...

We propose a novel model-free approach to obtain the joint risk-neutral distribution among several assets that is consistent with market prices of options on these assets and their weighted index. In an empirical application, we use options on the S&P 500 index and its nine industry sectors. The...

We derive the optimal portfolio for an expected utility maximizer whose utility does not only depend on terminal wealth but also on some random benchmark (state-dependent utility). We then apply this result to obtain the optimal portfolio of a loss-averse investor with a random reference point...

Robustness of risk measures to changes in underlying loss distributions (distributional uncertainty) is of crucial importance when making well-informed risk management decisions. In this paper, we quantify for any given distortion risk measure its robustness to distributional uncertainty by...

Recent literature has investigated the risk aggregation of a portfolio X=(Xi) under the sole assumption that the marginal distributions of the risks Xi are specified but not their dependence structure. There exists a range of possible values for any risk measure of S=X1 X2 ... Xn and the...

In this paper, we assess the magnitude of model uncertainty of credit risk portfolio models, i.e., what is the maximum and minimum Value-at-Risk (VaR) of a portfolio of risky loans that can be justi ed given a certain amount of available information. Puccetti and Ruschendorf (2012a) and...

The bounds for risk measures of a portfolio when its components have known marginal distributions but the dependence among the risks is unknown are often too wide to be useful in practice. Moreover, availability of additional dependence information, such as knowledge of some higher-order...

We construct an algorithm that makes it possible to numerically obtain an investor's optimal portfolio under general preferences. In particular, the objective function and risks constraints may be driven by benchmarks (reflecting state-dependent preferences). We apply the algorithm to various...