Wednesday, November 17, 2021 - 16:00 in V10-122
Success and failure of the financial regulation on a surplus-driven financial company
A talk in the Bielefeld Stochastic Afternoon series by
An Chen
| Abstract: |
$$\textbf{Bielefeld Stochastic Afternoon - Math Finance Session}$$
This paper studies an optimal asset allocation problem for a surplus-driven financial institution facing a quantile-based constraint, i.e., under a Value-at-Risk (VaR) or an Average Value-at-Risk (AVaR) constraint or a shortfall-based constraint, i.e., an expected shortfall or an expected discounted shortfall constraint. We obtain closed-form solutions to the optimal wealth for the non-concave utility maximization problem under constraints. We find that the quantile- and shortfall-based regulation can effectively reduce the probability of default for a surplus-driven financial institution. However, the liability holders' benefits cannot be fully protected under either type of regulation. This is based on a joint work with Mitja Stadje and Fangyuan Zhang.
Within the CRC this talk is associated to the project(s): C3, C4, C5 |
Back
