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Stochastic models are now indispensable for answering practical questions on finance and insurance. Their use needs to be based on a careful model validation process and an awareness of model limitations. In risk management, being able to react to negative trends is essential. Resulting questions can be directly linked to stochastic optimisation problems. Background. Financial and insurance mathematics is playing a prominent role in current probability theory. Its contributions are twofold: the analysis of practical problems is leading to deep theoretical findings, and results, which had been considered to be purely of a theoretical nature, are also feeding into applications.
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