It has been shown at different levels of generality that under increasing risk aversion utility indifference sell prices of a contingent claim converge to the super-replication price and the shortfalls of utility maximizing hedging portfolios starting from the superreplication price tend to zero in L1. In this paper we give an example of a one-period financial model with bounded prices where ut...

In this paper, we propose a participative method to design a security risk reference model, composed of a domain model and a security risk model. We relate the application of the method to our attempt for a design of a national reference model of the medical laboratories in Luxembourg, for which we ran five participative workshops with domain experts to gather their knowledge. We validated the ...

This paper is concerned with several types of ruin probabilities for a multivariate compound Poisson risk model, where the claim size vector follows a multivariate phase type distribution. First, an explicit representation for the convolution of a multivariate phase type distribution is derived, and then an explicit formula for the ruin probability that the total claim surplus exceeds the total...

In higher education institutes (HEIs), Operations Management programmes (OMPs) are among those programmes attracting a substantial amount of international student enrollment. With the current situation that the government is reducing its funding input, the UK HEIs’ financial balance relies more than before on the international students who pay higher tuition fees; meanwhile, with the increased ...

We demonstrate, using data for the period 1954-2003, that di¤erences in exposure to consumption risk explains cross sectional di¤erences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on stocks to take into account well documented within year deterministic seasonal patterns in returns, mea...

Veraverbeke (1977, Stochastic Processes Appl. 5, no. 1, 27–37) and Embrechts and Veraverbeke (1982, Insurance Math. Econom. 1, no. 1, 55–72) obtained a simple asymptotic relation for the ruin probability in the renewal risk model under the assumption that the claim size is heavy tailed. This note points out that the relation still holds in the delayed renewal risk model.

In this note we provide a simple alternative derivation of an explicit formula of Kwan and Yang [14] for the probability of ruin in a risk model with a certain dependence between general claim inter-occurrence times and subsequent claim sizes of conditionally exponential type. The approach puts the type of formula in a general context, illustrating the potential for similar simple ruin probabil...

In this paper we address the issue of how to establish the fair value of an insurance-linked liability. This is done by considering the introduction into a simple, one-period market model of a new and quite general security (which, amongst other things, could be such a liability). We investigate the impact of this new security on the market and attempt to predict the price (the fair value) at w...

Dufresne et al. (1991) introduced a general risk model defined as the limit of compound Poisson processes. Such model is either a compound Poisson process itself or a strictly increasing Lévy process. Their construction is based on a nonnegative non-increasing function Q that governs the jumps of the process. This function, it turns out, is the tail of the Lévy measure of the process. We discus...

In this paper we consider the following inverse problem for the first hitting time distribution: given a Wiener process with a random initial state, probability distribution, F (t), and a linear boundary, b(t) = μt, find a distribution of the initial state such that the distribution of the first hitting time is F (t). This problem has important applications in credit risk modeling where the pro...