Instituto para el desarrollo empresarial (INDEM)
http://hdl.handle.net/10016/6577
2016-05-02T08:17:37ZVaR as the CVaR sensitivity : applications in risk optimization
http://hdl.handle.net/10016/22330
VaR as the CVaR sensitivity : applications in risk optimization
Balbás, Alejandro; Balbás, Beatriz; Balbás, Raquel
Universidad Carlos III de Madrid. Instituto par el Desarrollo Empresarial (INDEM)
VaR minimization is a complex problem playing a critical role in many actuarial and financial applications of mathematical programming. The usual methods of convex programming do not apply due to the lack of sub-additivity. The usual methods of differentiable programming do not apply either, due to the lack of continuity. Taking into account that the CVaR may be given as an integral of VaR, one has that VaR becomes a first order mathematical derivative of CVaR. This property will enable us to give accurate approximations in VaR optimization, since the optimization VaR and CVaR will become quite closely related topics. Applications in both finance and insurance will be given.
2016-02-01T00:00:00ZSequential arbitrage measurement in bond markets : theory and empirical applications in the Euro-zone
http://hdl.handle.net/10016/19879
Sequential arbitrage measurement in bond markets : theory and empirical applications in the Euro-zone
Balbás, Alejandro; Peng, Yao
Universidad Carlos III de Madrid. Instituto para el Desarrollo Empresarial (INDEM)
We develop a mathematical programing approach in order to measure the arbitrage size in bond markets. Transaction costs may be incorporated. The obtained arbitrage measures have two interesting interpretations: On the one hand they provide the highest available arbitrage profit with respect to the price of the sold (bought) securities. On the other hand they give the minimum relative (per dollar) bid (ask) price modification leading to an arbitrage free market. Moreover, some primal problems lead to optimal arbitrage strategies (if available), while their dual problems generate proxies for the Term Structure of Interest Rates. The developed methodology permits us to implement an empirical test in the Euro-zone during the Euro crisis. Classical literature justifies the relevance of empirical analyses verifying the degree of efficiency during market turmoils. Our empirical study of the German, French and Spanish sovereign bonds markets finds that the main arbitrage opportunities come from the price differences between maturity-matched strips or "On-The-Run Premium" for zero-coupon bonds. When we remove the strips and the zero-coupon bonds the arbitrage still exists in the Spanish market.
2015-01-14T00:00:00ZOptimal reinsurance under risk and uncertainty
http://hdl.handle.net/10016/19024
Optimal reinsurance under risk and uncertainty
Balbás, Alejandro; Balbás, Beatriz; Balbás, Raquel; Heras, Antonio
Universidad Carlos III de Madrid. Instituto para el Desarrollo Empresarial (INDEM)
This paper deals with the optimal reinsurance problem if both insurer and
reinsurer are facing risk and uncertainty, though the classical uncertainty free case is also
included. The insurer and reinsurer degrees of uncertainty do not have to be identical.
The decision variable is not the retained (or ceded) risk, but its sensitivity with respect to
the total claims. Thus, if one imposes strictly positive lower bounds for this variable, the
reinsurer moral hazard is totally eliminated.
Three main contributions seem to be reached. Firstly, necessary and sufficient opti-
mality conditions are given. Secondly, the optimal contract is often a bang-bang solution,
i:e:, the sensitivity between the retained risk and the total claims saturates the imposed
constraints. For some special cases the optimal contract might not be bang-bang, but there
is always a bang-bang contract as close as desired to the optimal one. Thirdly, the optimal
reinsurance problem is equivalent to other linear programming problem, despite the fact
that risk, uncertainty, and many premium principles are not linear. This may be impor-
tant because linear problems are easy to solve in practice, since there are very efficient
algorithms.
2014-06-01T00:00:00ZBank Competition, Borrower Competition and Interest Rates
http://hdl.handle.net/10016/19007
Bank Competition, Borrower Competition and Interest Rates
Bellón, Carlos
Universidad Carlos III de Madrid. Instituto para el Desarrollo Empresarial (INDEM)
The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.
2014-06-16T00:00:00Z