Risk Prioritization in Actuarial Risk Management

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The objective of my research is to develop scientifically sound quantitative tools for complex applications in the fields of insurance and risk management. My proposed research is to develop and investigate innovative risk prioritization strategies for actuarial risk management, through four broad research programs: (i) Optimal reinsurance models; (ii) Optimal hedging with basis risk; (iii) Index tracking; and (iv) Portfolio insurance. Through rigorous mathematical tools and sound optimization frameworks, my proposed research programs advance the science on risk management. The research is timely and is also of significant interest to insurance companies and other financial institutions by providing optimal strategy and guidance in the science of risk management. The key objective of the first research program is to develop theoretically interesting and practically useful optimal reinsurance models and derive their analytical solutions. The research is anticipated to significantly advance the scientific research on optimal reinsurance and deepen our understanding of using reinsurance as an effective risk management tool. The primary goal of the second research program is to develop optimal solutions to comprehensively addressing and quantifying the basis risk in a theoretically sound framework, especially focusing on a dynamic setting, which significantly increases the complexity of the problem. The third research program aims to develop novel and computationally efficient procedures for index tracking. The research is not only of paramount importance to the portfolio and fund managers but also actuaries in minimizing basis risk. The primary objective of the last research program is to devise new active asset management strategies with guarantee features and quantify their performance by taking into account a variety of pragmatically important factors. The established results are significantly helpful not only for the provider of a CPPI fund to conduct an effective evaluation on the gap risk, but also for the investors to deepen their understanding on their risk and reward tradeoffs. All the four proposed research programs will involve training of highly qualified personnel at the master’s, PhD, as well as postdoctoral levels.