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Optimal Insurance-Package and Investment Problem for an Insurer

Author

Listed:
  • Sheng Delei

    (Department of Applied Mathematics, Shanxi University of Finance and Economics, Taiyuan, 030006, China)

  • Xing Linfang

    (Department of Foundational Courses, Tianjin Railway Technical and Vocational College, Tianjin, 300241, China)

Abstract

An insurance-package is a combination being tie-in at least two different categories of insurances with different underwriting-yield-rate. In this paper, the optimal insurance-package and investment problem is investigated by maximizing the insurer’s exponential utility of terminal wealth to find the optimal combination-share and investment strategy. Using the methods of stochastic analysis and stochastic optimal control, the Hamilton-Jacobi-Bellman (HJB) equations are established, the optimal strategy and the value function are obtained in closed form. By comparing with classical results, it shows that the insurance-package can enhance the utility of terminal wealth, meanwhile, reduce the insurer’s claim risk.

Suggested Citation

  • Sheng Delei & Xing Linfang, 2018. "Optimal Insurance-Package and Investment Problem for an Insurer," Journal of Systems Science and Information, De Gruyter, vol. 6(1), pages 85-96, February.
    • Handle: RePEc:bpj:jossai:v:6:y:2018:i:1:p:85-96:n:6
    DOI: 10.21078/JSSI-2018-085-12
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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