This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest for positive reserve, and debit interest for negative reserve. Ruin occurs when the reserve drops below the critical value. The company controls the dividend ...

We present the results of an evaluation in which the objective was to assess how useful testing is for validating and correcting security risk models. The evaluation is based on two industrial case studies. In the first case study we analyzed a multilingual financial Web application, while in the second case study we analyzed a mobile financial application. In both case studies, the testing yie...

A typical shortcoming of most current credit portfolio models is the lack of a stochastic modeling of risk factors, such as interest rates or credit spreads, during the revaluation process at the risk horizon. Within the simple credit risk model underlying the Internal Ratings-based approach of Basel II with incorporated correlated interest rate risk the effect which results from neglecting the...

Operational risk is now increasingly being considered an important financial risk and has been gaining importance similar to market and credit risk. In particular, in the banking regulation for large financial institutions it is required that operational risk be separately measured. The capital being held to safeguard against such risk is very significant at a large financial institution. As ou...

Enterprise Risk Management (ERM) has become one of the most essential subjects in business management. This paper establishes how risk modeling can be applied to supply chain management, specifically to supply portfolio procurement decisions of a firm. In a single period setting, parts can be procured via traditional forward contracts, option contracts or spot purchases. Customer demand and spo...

This paper analyzes the impact of various assumptions about the association between aggregate default probabilities and the loss given default on bank loans and corporate bonds, and seeks to empirically explain this critical relationship. Moreover, it simulates the effects on mandatory capital requirements like those proposed in 2001 by the Basel Committee on Banking Supervision. We present the...

In this paper,we consider a general Lévy riskmodelwith two-sided jumps and a constant dividend barrier. We connect the ruin problem of the ex-dividend risk process with the first passage problem of the Lévy process reflected at its running maximum. We prove that if the positive jumps of the risk model form a compound Poisson process and the remaining part is a spectrally negative Lévy process w...

Let Xi (i = 1, 2, . . .) be a sequence of subexponential positive independent and identically distributed random variables. In this paper we offer two alternative approaches to obtain higher-order expansions of the tail of ∑n i=1 Xi and subsequently for ruin probabilities in renewal risk models with claim sizes Xi. In particular, these emphasize the importance of the term P( ∑n i=1 Xi > s,max(X...

This paper considers the expected penalty functions for a discrete semi-Markov risk model with randomized dividends. Under the model, individual claims are governed by a Markov chain with finite state space, and the insurer pays a dividend of 1 with a probability at the end of each period if the present surplus is greater than or equal to a threshold value. Recursive formulae and the initial va...