Pension products and long-term insurance policies play a crucial role in our societies. This talk explores approaches for their cost-effective production through investments in financial markets. The key tool here is to link financial and insurance strategies to an appropriate fundamental theorem. To address the risks and uncertainties inherent in such investments, we draw on methods from financial mathematics and the framework of Knightian uncertainty. We will discuss recent developments in this field, highlighting their implications for the sustainable and resilient structuring of pension and insurance products.

A zero coupon bond is a contract where one party offers a fixed payment at a pre-specified

time point which is called its maturity. A forward rate curve is a theoretical function that encodes the

prices of all possible bonds with varying maturities at one given point of time. There are various models

that explain the behaviour of forward rate curves accross time. The most principle model in this direction

is the Heath Jarrow Morton (HJM)-model which models the forward rate curve directly. This model is

known to be free of arbitrage if and only if the HJM-drift condition holds.

We are interested in finite dimensional HJM-models which stay on one fixed given finite dimensional

manifold, roughly spoken this means that the model stays within a fixed finitely parametrised family

of curves. It is well known, that a curve valued process can only stay on a prescribed manifold if the

Stratonovich drift is tangential to the manifold at all time, or more simply, if we can instead find a

parameter process which selects the curve seen at a given time. From a statistical point of view it would

be desirable to leave the diffusion coefficient of the parameter process open for estimation, or in the

language of manifolds that means that any tangential diffusion coefficient should be left open as possible.

In this presentation, we find those finite dimensional manifolds where the diffusion coefficient remains

fully open for estimation while still allowing for the HJM-drift condition to be met. It turns out that the

resulting manifolds are nowhere locally affine. More so, they are nowhere affinely foliated as has been

suggested by earlier work (however under different assumptions).

We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution of portfolio assets is known as well as in the situation where it is uncertain and only assumed to belong to a set of mixtures of benchmark distributions (mixture uncertainty) or to a cloud around a benchmark distribution (box uncertainty). The comparison with the classical Average Value at Risk shows that portfolio selection under its recovery version allows financial institutions to better control the recovery of liabilities while still allowing for tractable computations. The talk is based on joint work with Cosimo Munari, Justin Plückebaum and Lutz Wilhelmy.

Nonlinear Lévy processes, as established within the general framework by A. Neufeld and M. Nutz, offer a versatile foundation without restrictions on the characteristic triplets. Building on this foundational work, we focus specifically on G-Lévy processes, a concept introduced by S. Peng. Adopting Peng's approach, we construct the Itô integral with respect to G-Lévy processes and examine its associated properties. Alongside, we delve into results concerning the uniqueness of fully nonlinear integro-partial differential equations and briefly discuss the technical challenges.

We propose a continuous-time equilibrium model with a representative agent that is subject to stochastically fluctuating sentiments. Sentiments dynamically respond to past price movements and exhibit jumps, which occur more frequently when sentiments are disconnected from underlying fundamentals. We model feedback effects between asset prices and sentiment in both directions. Our analysis shows that in equilibrium, sentiments affect prices even though they have no direct impact on the asset’s fundamentals. Empirically, the equilibrium risk premia and risk-free rate respond to measurable shifts in sentiment in the direction predicted by the model. 

We shall present different versions of McKean-Vlasov and mean-field BSDEs of increasing generality, and the notion of backward propagation of chaos. We will then discuss some of the technical difficulties associated with the corresponding limit theorems and see some of their immediate corollaries and rates of convergence. Finally, we will introduce the concept of stability with respect to data sets for the backward propagation of chaos, and state the intermediate results that allowed us to prove its validity under a natural framework.

We introduce a variant of optimal transport adapted to the causal structure given by an underlying directed graph G. Different graph structures lead to different specifications of the optimal transport problem. For instance, a fully connected graph yields standard optimal transport, a linear graph structure corresponds to causal optimal transport between the distributions of two discrete-time stochastic processes, and an empty graph leads to a notion of optimal transport related to CO-OT, Gromov–Wasserstein distances and factored OT. We derive different characterizations of G-causal transport plans and introduce Wasserstein distances between causal models that respect the underlying graph structure. We show that average treatment effects are continuous with respect to G-causal Wasserstein distances and small perturbations of structural causal models lead to small deviations in G-causal Wasserstein distance. We also introduce an interpolation between causal models based on G-causal Wasserstein distance and compare it to standard Wasserstein interpolation.