Applications of Stochastic Optimization in Finance and Insurance

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The principal theme of the research program outlined in this proposal is the application of mathematical methods from probability and optimization to problems of decision making under uncertainty in insurance and finance. The program is designed to have development flow in both directions, as applications of mathematical techniques make contributions to real-world problems faced in industry, and novel industrial challenges provoke mathematical questions that may lead to new theoretical developments. Three main topics dominate the research program. These are: i) hybrid pension structures and their valuation, hedging and management, ii) the structure of fee agreements for asset management and the incentives that they create, and iii) the development of the mathematics of stress testing in financial institutions.