3,483 research outputs found
Optimal asset allocation for pension funds under mortality risk during the accumulation and ecumulation phases
In a financial market with one riskless asset and n risky assets following geometric Brownian motions, we solve the problem of a pension fund maximizing the expected CRRA utility of its terminal wealth. By considering a stochastic death time for a subscriber, we solve a unique problem for both accumulation and decumulation phases. We show that the optimal asset allocation during these two phases must be different. In particular, during the first phase the investment in the risky assets should decrease through time to meet future contractual pension payments while, during the second phase, the risky investment should increase through time because of closeness of death time. Our findings also suggest that it is not optimal to manage the two phases separately.pension fund; mortality risk; asset allocation
Applying revenue management to agent-based transportation planning
We consider a multi-company, less-than-truckload, dynamic VRP based on the concept of multi-agent systems. We focus on the intelligence of one vehicle agent and especially on its bidding strategy. We address the problem how to price loads that are offered in real-time such that available capacity is used in the most profitable way taking into account possible future revenues. We develop methods to price loads dynamically based on revenue management concepts.\ud
We consider a one leg problem, i.e., a vehicle travels from i to j and can wait at most τ time units in which it can get additional loads from i to j. We develop a DP to price loads given a certain amount of remaining capacity and an expected number of auctions in the time-to-go. Because a DP might be impractical if parameters change frequently and bids has to be determined in real-time, we derived two approximations to speed up calculations. The performance of these approximations are compared with the performance of the DP. Besides we introduce a new measure to calculate the average vehicle utilisation in consolidated shipments. This measure can be calculated based on a limited amount of data and gives an indication of the efficiency of schedules and the performance of vehicles
Stable-1/2 Bridges and Insurance
We develop a class of non-life reserving models using a stable-1/2 random
bridge to simulate the accumulation of paid claims, allowing for an essentially
arbitrary choice of a priori distribution for the ultimate loss. Taking an
information-based approach to the reserving problem, we derive the process of
the conditional distribution of the ultimate loss. The "best-estimate ultimate
loss process" is given by the conditional expectation of the ultimate loss. We
derive explicit expressions for the best-estimate ultimate loss process, and
for expected recoveries arising from aggregate excess-of-loss reinsurance
treaties. Use of a deterministic time change allows for the matching of any
initial (increasing) development pattern for the paid claims. We show that
these methods are well-suited to the modelling of claims where there is a
non-trivial probability of catastrophic loss. The generalized inverse-Gaussian
(GIG) distribution is shown to be a natural choice for the a priori ultimate
loss distribution. For particular GIG parameter choices, the best-estimate
ultimate loss process can be written as a rational function of the paid-claims
process. We extend the model to include a second paid-claims process, and allow
the two processes to be dependent. The results obtained can be applied to the
modelling of multiple lines of business or multiple origin years. The
multi-dimensional model has the property that the dimensionality of
calculations remains low, regardless of the number of paid-claims processes. An
algorithm is provided for the simulation of the paid-claims processes.Comment: To appear in: Advances in Mathematics of Finance (A. Palczewski and
L. Stettner, editors.), Banach Center Publications, Polish Academy of
Science, Institute of Mathematic
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Excess of loss reinsurance under joint survival optimality
Explicit expressions for the probability of joint survival up to time x of the cedent and the reinsurer, under an excess of loss reinsurance contract with a limiting and a retention level are obtained, under the reasonably general assumptions of any non-decreasing premium income function, Poisson claim arrivals and continuous claim amounts, modelled by any joint distribution. By stating appropriate optimality problems, we show that these results can be used to set the limiting and the retention levels in an optimal way with respect to the probability of joint survival. Alternatively, for fixed retention and limiting levels, the results yield an optimal split of the total premium income between the two parties in the excess of loss contract. This methodology is illustrated numerically on several examples of independent and dependent claim severities. The latter are modelled by a copula function. The effect of varying its dependence parameter and the marginals, on the solutions of the optimality problems and the joint survival probability, has also been explored
Incentive Systems in Multi-Level Markets for Virtual Goods
As an alternative to rigid DRM measures, ways of marketing virtual goods
through multi-level or networked marketing have raised some interest. This
report is a first approach to multi-level markets for virtual goods from the
viewpoint of theoretical economy. A generic, kinematic model for the monetary
flow in multi-level markets, which quantitatively describes the incentives that
buyers receive through resales revenues, is devised. Building on it, the
competition of goods is examined in a dynamical, utility-theoretic model
enabling, in particular, a treatment of the free-rider problem. The most
important implications for the design of multi-level market mechanisms for
virtual goods, or multi-level incentive management systems, are outlined.Comment: 18 pages, 5 figures; graphics with reduced resolution. Full
resolution available on author's homepage. Accepted contribution to the
Workshop 'Virtual Goods' at the Conference AXMEDIS 2005, 30. November - 2.
December, Florence, Ital
Dynamic threshold policy for delaying and breaking commitments in transportation auctions
In this paper we consider a transportation procurement auction consisting of shippers and carriers. Shippers offer time sensitive pickup and delivery jobs and carriers bid on these jobs. We focus on revenue maximizing strategies for shippers in sequential auctions. For this purpose we propose two strategies, namely delaying and breaking commitments. The idea of delaying commitments is that a shipper will not agree with the best bid whenever it is above a certain reserve price. The idea of breaking commitments is that the shipper allows the carriers to break commitments against certain penalties. The benefits of both strategies are evaluated with simulation. In addition we provide insight in the distribution of the lowest bid, which is estimated by the shippers
Integration of Forecasting, Scheduling, Machine Learning, and Efficiency Improvement Methods into the Sport Management Industry
Sport management is a complicated and economically impactful industry and involves many crucial decisions: such as which players to retain or release, how many concession vendors to add, how many fans to expect, what teams to schedule, and many others are made each offseason and changed frequently. The task of making such decisions effectively is difficult, but the process can be made easier using methods of industrial and systems engineering (ISE). Integrating methods such as forecasting, scheduling, machine learning, and efficiency improvement from ISE can be revolutionary in helping sports organizations and franchises be consistently successful. Research shows areas including player evaluation, analytics, fan attendance, stadium design, accurate scheduling, play prediction, player development, prevention of cheating, and others can be improved when ISE methods are used to target inefficient or wasteful areas
Time-dependent pricing and New Keynesian Phillips curve
This paper explores what can be lost when assuming price adjustment is a time - independent (memoryless) process.I derive a generalized NKPC in an optinizing model with the non- constant hazard function and trend inflation. Memory emerges in the resulting Phillips curve through the presence of lagged inflation and lagged expectations. It nests the Calvo NKPC as a limitting case in the sense that the effect of both terms are canceled out by one another under the constant-hazard assumption. Furthermore, I find lagged inflation always has negative coefficients, thereby making it impossible to interpret inflation persistence as intrinsic to the model. The numerical evaluation shows that introducing trend inflation strengthens the effects of the increasing hazard function on the inflation dynamics . The model can jointly account for persistent dynamics of inflation and output, hump-shaped impulse responses of inflation to monetary shocks, and the fact that high trend inflation leads to more persistence in inflation but not for real variables. --Intrinsic inflation persistance,Hazard function,New Keynesian Phillips Curve
Irreversible Investment, Real Options, and Competition: Evidence from Real Estate Development
We examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1,214 condominium developments in Vancouver, Canada built from 1979-1998. We find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments. Empirically, a one-standard deviation increase in the return volatility reduces the probability of investment by 13 percent, equivalent to a 9 percent decline in real prices. Increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development. These results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion.
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