Equity allocation and portfolio selection in insurance
Taflin, Erik (2000), Equity allocation and portfolio selection in insurance, Insurance Mathematics and Economics, 27, 1, p. 65-81. http://dx.doi.org/10.1016/S0167-6687(99)00062-1
TypeArticle accepté pour publication ou publié
External document linkhttp://arxiv.org/abs/math/9907160v1
Journal nameInsurance Mathematics and Economics
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Abstract (EN)A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both liabilities and assets, it is proved that the model has solutions respecting constraints on ROEs, ruin probabilities and market shares currently in practical use. Solutions define global and optimal risk management strategies of the company. Mathematical existence results and tools, such as the inversion of the linear part of the Euler–Lagrange equations, developed in a preceding paper in the context of a simplified model are essential for the mathematical and numerical construction of solutions of the model.
Subjects / KeywordsInsurance; Equity allocation; Portfolio selection; Value at risk
JELC6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
G11 - Portfolio Choice; Investment Decisions
G22 - Insurance; Insurance Companies; Actuarial Studies
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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