The importance of diversification and risk management was recognized by a few visionaries in the early days of investing. Only in the 1950's, however, did these concepts become central. Since then, increasingly sophisticated mathematical and statistical tools have been brought to bear on the problem of estimating the aggregate risk of a portfolio. This risk depends crucially on the covariances ...

There has been a recent debate in the marketing literature concerning the possible mispricing of customer satisfaction. While earlier studies claim that portfolios with attractive out-of-sample properties can be formed by loading on stocks whose firms enjoy high customer satisfaction, later studies challenge this finding. A large part of the disagreement stems from the difficulty of how to actu...

Portfolio credit risk models as well as models for operational risk can often be treated analogously to the collective risk model coming from insurance. Applying the classical Panjer recursion in the collective risk model can lead to numerical instabilities, for instance if the claim number distribution is extended negative binomial or extended logarithmic. We present a generalization of Panjer...

We consider an insurance risk process with the possibility to invest the capital reserve into a portfolio consisting of risky assets and a riskless asset. The stock price is modeled by an exponential Lévy process and the riskless interest rate is assumed to be constant. We aim at the risk assessment of the integrated risk process in terms of a high quantile or the far out distribution tail. We ...

We propose a reduced form model for default that allows us to derive closed-form solutions to all the key ingredients in credit risk modeling: risk-free bond prices, defaultable bond prices (with and without stochastic recovery) and probabilities of survival. We show that all these quantities can be represented in general exponential quadratic forms, despite the fact that the intensity is allow...

In this work, we investigate a multi-risk model describing insurance business with two or more independent series of claim amounts. Each series of claim amounts consists of independent nonnegative random variables. Claims of each series occur periodically with some fixed inter-arrival time. Claim amounts occur until they can be compensated by a common premium rate and the initial insurer’s surp...

Using banks’ internal models for regulatory purposes, while aimed at making capital requirements more accurate, invites regulatory arbitrage. I develop a framework to study the strategic selection of risk models, and derive predictions in line with recent empirical evidence. I also study optimal regulations. Penalizing banks with low risk-weights when they suffer abnormal losses is a powerful t...

Formal safety assessment (FSA), as a structured and systematic risk evaluation methodology, has been increasingly and broadly used in the shipping industry around the world. Concerns have been raised as to navigational safety of the Yangtze River, China's largest and the world's busiest inland waterway. Over the last few decades, the throughput of ships in the Yangtze River has increased rapidl...

The paper presents a competing-risks approach for investigating the determinants of corporate financial distress. In particular a comparative analysis of three European markets France, Italy and Spain – is performed in order to find out the similarities and the differences in the determinants of distress. By using the AMADEUS dataset, two possible causes of exit from the market are considered: ...