In conjunction with the Committee on the Global Financial System Working Group project on foreign direct investment in emerging market financial sectors, staff of the U.S. Federal Reserve examined the market for political risk insurance (PRI) and its use by financial institutions to mitigate emerging market risks. A series of meetings were undertaken in 2003 with U.S. commercial and investment ...

As with all aspects of business and the economy, information security is an economic function. Security can be modeled as a maintenance or insurance cost as a relative function but never in absolute terms. As such, security can be seen as a cost function that leads to the prevention of loss, but not one that can create gains (or profit). With the role of a capital investment to provide a return...

This paper deals with optimal investment and redistribution of the free reserves connected to life and pension insurance contracts in form of dividends and bonus. Formulated appropriately this problem can be viewed as a modification of Merton’s problem of optimal consumption and investment with a very particular form of consumption and utility hereof. Both are linked to a finite state Markov ch...

This paper introduces a financial hedging model for global environment risks. Our approach is based on portfolio insurance under hedging constraints. Investors are assumed to maximize their expected utilities defined on financial and environmental asset values. The optimal investment is determined for quite general utility functions and hedging constraints. In particular, our results suggest ho...

We consider an insurance company whose risk reserve is given by a Brownian motion with drift and which is able to invest the money into a Black–Scholes financial market. As optimization criteria, we treat mean-variance problems, problems with other risk measures, exponential utility and the probability of ruin. Following recent research, we assume that investment strategies have to be determini...

Educational risk and wage uncertainty are important features in human capital investment. Therefore, we apply an OLG-model, wherein human capital formation is exposed to idiosyncratic risk. Extending the instruments available for social insurance, a (Norwegian-type) two-bracket progressive labor tax system and education subsidies are shown to enhance the efficiency-insurance trade-off and to in...

We show how to solve Merton optimal investment stochastic control problem for Hawkes-based models in finance and insurance, i.e., a wealth portfolio X(t) consisting of bond stock price described by general compound Hawkes process (GCHP), capital R(t) an insurance company with the amount claims risk model based on GCHP. The novelty results consists new those models.

The present paper considers a retiree of a certain age with an initial endowment of investable wealth facing the following alternative investment opportunities. One possibility is to buy a single premium immediate annuity-contract. This insurance contract pays a life-long constant pension payment of a certain amount, depending e.g. on the age of the retiree, the operating cost of the insurance ...