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Equity Allocation and Portfolio Selection in Insurance: A simplified Portfolio Model

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  • Erik Taflin

    (AXA)

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    Abstract

    A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its variance and on annual ROE's. Existence of a unique solution is proved and a Lagrangian formalism is given. An effective method for solving the Euler-Lagrange equations is developed. The approximate determination of the multipliers is discussed. This basic model is an important building block for more complete models.

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    File URL: http://128.118.178.162/eps/ge/papers/9906/9906002.ps.gz
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    Bibliographic Info

    Paper provided by EconWPA in its series GE, Growth, Math methods with number 9906002.

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    Date of creation: 22 Jun 1999
    Date of revision: 23 Jul 1999
    Handle: RePEc:wpa:wuwpge:9906002

    Note: Type of document submitted: Postscript; prepared with LaTeX2e;
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    Web page: http://128.118.178.162

    Related research

    Keywords: Insurance; Equity Allocation; Portfolio Selection;

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    1. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
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