Risks, Volume 5, Issue 4

In this work, we introduce a general framework for incorporating stochastic recovery into structural models. The framework extends the approach to recovery modeling developed in Cohen and Costanzino (2015, 2017) and provides for a systematic way to i...

We consider the subject of approximating tail probabilities in the general compound renewal process framework, where severity data are assumed to follow a heavy-tailed law (in that only the first moment is assumed to exist). By using the weak converg...

The aim of the Special Issue is to address some of the main challenges individuals and companies face in managing financial and actuarial risks, when dealing with their investment/retirement or business-related decisions [...]

Future stock prices depend on many internal and external factors that are not easy to evaluate. In this paper, we use the Hidden Markov Model, (HMM), to predict a daily stock price of three active trading stocks: Apple, Google, and Facebook, based on...

Diffusions are widely used in finance due to their tractability. Driftless diffusions are needed to describe ratios of asset prices under a martingale measure. We provide a simple example of a tractable driftless diffusion which also has a bounded st...

In this paper, we investigate the impact of the accident reporting strategy of drivers, within a Bonus-Malus system. We exhibit the induced modification of the corresponding class level transition matrix and derive the optimal reporting strategy for...

In the present paper, we study quantile risk measures and their domain. Our starting point is that, for a probability measure Q on the open unit interval and a wide class L Q of random variables, we define the quantile risk measure ϱ Q...

Generalized linear models might not be appropriate when the probability of extreme events is higher than that implied by the normal distribution. Extending the method for estimating the parameters of a double Pareto lognormal distribution (DPLN) in R...

This paper considers an alternative way of structuring stochastic variables in a dynamic programming framework where the model structure dictates that numerical methods of solution are necessary. Rather than estimating integrals within a Bellman equa...

The paper deals with defaultable markets, one of the main research areas of mathematical finance. It proposes a new approach to the theory of such markets using techniques from the calculus of optional stochastic processes on unusual probability spac...