Optimal reinsurance under risk and uncertainty

This paper deals with the optimal reinsurance problem if both insurer and reinsurer are facing risk and uncertainty, though the classical uncertainty free case is also included. The insurer and reinsurer degrees of uncertainty do not have to be identical. The decision variable is not the retained (or ceded) risk, but its sensitivity with respect to the total claims. Thus, if one imposes strictly positive lower bounds for this variable, the reinsurer moral hazard is totally eliminated.Three main contributions seem to be reached. Firstly, necessary and sufficient optimality conditions are given in a very general setting. Secondly, the optimal contract is often a bang–bang solution, i.e., the sensitivity between the retained risk and the total claims saturates the imposed constraints. Thirdly, the optimal reinsurance problem is equivalent to other linear programming problem, despite the fact that risk, uncertainty, and many premium principles are not linear. This may be important because linear problems may be easily solved in practice, since there are very efficient algorithms.     

Nash equilibrium strategies for a defined contribution pension management

This paper studies the time-consistent investment strategy for a defined contribution (DC) pension plan under the mean–variance criterion. Since the time horizon of a pension fund management problem is relatively long, two background risks are taken into account: the inflation risk and the salary risk. Meanwhile, there are a risk-free asset, a stock and an inflation-indexed bond available in the financial market. The extended Hamilton–Jacobi–Bellman (HJB for short) equation of the equilibrium value function and the verification theorem corresponding to our problem are presented. The closed-form time-consistent investment strategy and the equilibrium efficient frontier are obtained by stochastic control technique. The effects of the inflation and stochastic income on the equilibrium strategy and the equilibrium efficient frontier are illustrated by mathematical and numerical analysis. Finally, we compare in detail the time-consistent results in our paper with the pre-commitment one and find the distinct properties of these two results.     

Robust investment–reinsurance optimization with multiscale stochastic volatility

This paper investigates the investment and reinsurance problem in the presence of stochastic volatility for an ambiguity-averse insurer (AAI) with a general concave utility function. The AAI concerns about model uncertainty and seeks for an optimal robust decision. We consider a Brownian motion with drift for the surplus of the AAI who invests in a risky asset following a multiscale stochastic volatility (SV) model. We formulate the robust optimal investment and reinsurance problem for a general class of utility functions under a general SV model. Applying perturbation techniques to the Hamilton–Jacobi–Bellman–Isaacs (HJBI) equation associated with our problem, we derive an investment–reinsurance strategy that well approximates the optimal strategy of the robust optimization problem under a multiscale SV model. We also provide a practical strategy that requires no tracking of volatility factors. Numerical study is conducted to demonstrate the practical use of theoretical results and to draw economic interpretations from the robust decision rules.     

Evaluation and default time for companies with uncertain cash flows

In this study, we propose a modelling framework for evaluating companies financed by random liabilities, such as insurance companies or commercial banks. In this approach, earnings and costs are driven by double exponential jump–diffusion processes and bankruptcy is declared when the income falls below a default threshold, which is proportional to the charges. A change of numeraire, under the Esscher risk neutral measure, is used to reduce the dimension. A closed form expression for the value of equity is obtained in terms of the expected present value operators, with and without disinvestment delay. In both cases, we determine the default threshold that maximizes the shareholder’s equity. Subsequently, the probabilities of default are obtained by inverting the Laplace transform of the bankruptcy time. In numerical applications of the proposed model, we apply a procedure for calibration based on market and accounting data to explain the behaviour of shares for two real-world examples of insurance companies.     

Optimal proportional reinsurance with common shock dependence

In this paper, we consider the optimal proportional reinsurance strategy in a risk model with multiple dependent classes of insurance business, which extends the work of Liang and Yuen (2014) to the case with the reinsurance premium calculated under the expected value principle and to the model with two or more classes of dependent risks. Under the criterion of maximizing the expected exponential utility, closed-form expressions for the optimal strategies and value function are derived not only for the compound Poisson risk model but also for the diffusion approximation risk model. In particular, we find that the optimal reinsurance strategies under the expected value premium principle are very different from those under the variance premium principle in the diffusion risk model. The former depends not only on the safety loading, time and interest rate, but also on the claim size distributions and the counting processes, while the latter depends only on the safety loading, time and interest rate. Finally, numerical examples are presented to show the impact of model parameters on the optimal strategies.     

Syntheses, Crystal Structures and Properties of Two Supramolecules Assembled from Weak Interactions

Two complexes, [Cu2(Htdb)4(H2O)2] (1) and [Cd(bipy)2(Hmcmbc)2] (2) (H2tdb = 2,2-thiodibenzoic acid, H2mcmbc = m-(carboxyl-methyloxy)-benzenecarboxylic acid, bipy = 4,4'-bipyridine), have been prepared, and were characterized by elemental analysis, FT-IR and single-crystal X-ray diffraction. Structures indicate that complex 1 is a single molecule, and 2 is a one-dimensional chain. Their two-and three-dimensional frameworks are constructed through hydrogen bonding, π…π or C–H…π stacking, and such other weak interactions. The cyclic voltametric behavior of complex 1 and luminescence property of complex 2 were investigated. 1 belongs to the triclinic system, space group P with a = 7.8607(6), b = 11.7619(9), c = 15.3481(12) , α = 109.3670(10), β = 92.4420(10), γ = 92.0450(10)°, V = 1335.65(18) 3, Mr = 1256.26, Dc = 1.5619(2) g/cm3, F(000) = 642, μ = 1.029 mm–1, Z = 1, the final R = 0.0289 and wR = 0.0763 for 5199 observed reflections with I > 2σ(I). Complex 2 crystallizes in triclinic, space group P with a = 9.6378(10), b = 9.7508(10), c = 19.055(2) , α = 88.7020(10), β = 80.5260(10), γ = 69.2000(10)o, V = 1649.9(3) 3, Mr = 815.07, Dc = 1.641 g/cm3, μ = 0.732 mm-1, F(000) = 828, Z = 2, the final R = 0.0511 and wR = 0.1149 for 4729 observed reflections (I > 2σ(I)).     

On constant elasticity of substitution – Constant elasticity of transformation Directional Distance Functions

This paper aims to present non-linear CES (Constant Elasticity of Substitution)–CET (Constant Elasticity of Transformation) Directional Distance Functions. These measures inherit the structure of the standard Directional Distance Functions and that of the CES–CET technology. These functions allow non-parametric estimation of efficiency scores through linear programming method. Besides, the CES –CET technology gives the opportunity to explore α-returns to scale assumption for the new distance functions. The duality theory is investigated through pseudo profit, cost and revenue functions. The dual standpoint provides non-linear adjusted prices that can occur into non-linear pricing practices. An application is proposed to give an illustrative example of the primal CES–CET Directional Distance Functions.     

Weighted core–EP inverse of an operator between Hilbert spaces

We introduce and study the weighted core–EP inverse of an operator between two Hilbert spaces as a generalization of the weighted core–EP inverse for a rectangular matrix. Several new properties of weighted core–EP inverses are given and some known results are extended. Using a weighted operator, the core–EP pre-order and the minus partial order of corresponding operators, we define new pre-orders on the set of all Wg–Drazin invertible operators between two Hilbert spaces. As consequences of our results, we present a new characterization and new representations of the core–EP inverse, new characterizations of the core–EP pre-order and extend the core–EP pre-order to a partial order.     

On explicit order 1.5 approximations with varying coefficients: The case of super-linear diffusion coefficients

A conjecture appears in Kumar and Sabanis (2016), in the form of a remark, where it is stated that it is possible to construct, in a specified way, any high order explicit numerical schemes to approximate the solutions of SDEs with superlinear coefficients. We answer this conjecture to the positive for the case of order 1.5 approximations and show that the suggested methodology works. Moreover, we explore the case of having Hölder continuous derivatives for the diffusion coefficients.