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A Model For The Optimal Asset-Liability Management For Insurance Companies

Author

Listed:
  • S. SBARAGLIA

    (Istituto per le Applicazioni del Calcolo "Mauro Picone" - C.N.R., Via del Policlinico, 137 - 00161 Rome, Italy)

  • M. PAPI

    (Istituto per le Applicazioni del Calcolo "Mauro Picone" - C.N.R., Via del Policlinico, 137 - 00161 Rome, Italy)

  • M. BRIANI

    (Istituto per le Applicazioni del Calcolo "Mauro Picone" - C.N.R., Via del Policlinico, 137 - 00161 Rome, Italy)

  • M. BERNASCHI

    (Istituto per le Applicazioni del Calcolo "Mauro Picone" - C.N.R., Via del Policlinico, 137 - 00161 Rome, Italy)

  • F. GOZZI

    (Dipartimento di Matematica per le Decisioni Economiche Finanziarie e Assicurative, Facoltà di Economia. Via del Castro Laurenziano 9, 00161 Roma, Italy)

Abstract

This paper is devoted to the formulation of a model for the optimal asset-liability management for insurance companies. We focus on a typical guaranteed investment contract, by which the holder has the right to receive afterTyears a return that cannot be lower than a minimum predefined raterg. We take account of the rules that usually are imposed to insurance companies in the management of this funds as reserves and solvency margin. We formulate the problem as a stochastic optimization problem in a discrete time setting comparing this approach with the so-called hedging approach. The utility function to maximize depends on various parameters including specific goals of the company management.Some preliminary numerical results are reported to ease the comparison between the two approaches.

Suggested Citation

  • S. Sbaraglia & M. Papi & M. Briani & M. Bernaschi & F. Gozzi, 2003. "A Model For The Optimal Asset-Liability Management For Insurance Companies," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 277-299.
    • Handle: RePEc:wsi:ijtafx:v:06:y:2003:i:03:n:s0219024903001906
    DOI: 10.1142/S0219024903001906
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    References listed on IDEAS

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    1. Grosen, Anders & Lochte Jorgensen, Peter, 2000. "Fair valuation of life insurance liabilities: The impact of interest rate guarantees, surrender options, and bonus policies," Insurance: Mathematics and Economics, Elsevier, vol. 26(1), pages 37-57, February.
    2. Jensen, Bjarne Astrup & Sørensen, Carsten, 2000. "Paying for minimum interest rate guarantees: Who should compensate who?," Working Papers 2000-1, Copenhagen Business School, Department of Finance.
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