In this paper, we consider the optimal dividend payment strategy for an insurance company that has two collaborating business lines. The surpluses of the business lines are modeled by diffusion processes. The collaboration between the two business lines permits that money can be transferred from one line to another with or without proportional transaction costs, while money must be transferred from one line to another to help both business lines keep running before simultaneous ruin of the two lines eventually occurs.

One of the central issues in credit risk measurement and management is modeling and predicting correlated defaults. In this paper we introduce a novel model to investigate the relationship between correlated defaults of different industrial sectors a

(2013). On pricing basket credit default swaps. Quantitative Finance: Vol. 13, Themed Issue on Credit, pp. 1845-1854.

Pairs trading is a typical example of a convergence trading strategy. Investors buy relatively under-priced assets simultaneously, and sell relatively over-priced assets to exploit temporary mispricing. This study examines optimal pairs trading strategies under symmetric and non-symmetric trading constraints. Under the assumption that the price spread of a pair of correlated securities follows a mean-reverting Ornstein-Uhlenbeck(OU) process, analytical trading strategies are obtained under a mean-variance(MV) framework. Model estimation and empirical studies on trading strategies have been conducted using data on pairs of stocks and futures traded on China’s securities market. These results indicate that pairs trading strategies have fairly good performance.

In this paper we propose a unified utility deviation-risk model which covers both utility maximization and mean-variance analysis as special cases. We derive the time-consistent Hamilton--Jacobi--B...