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Mean-variance optimization for participating life insurance contracts

Author

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  • Fießinger, Felix
  • Stadje, Mitja

Abstract

This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the multi-dimensional Black-Scholes model, showing the existence of all necessary parameters. Moreover, we provide a numerical analysis of the Black-Scholes market. The equity holders on average increase their investment into the risky asset in bad economic states and decrease their investment over time.

Suggested Citation

  • Fießinger, Felix & Stadje, Mitja, 2025. "Mean-variance optimization for participating life insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 122(C), pages 230-248.
    • Handle: RePEc:eee:insuma:v:122:y:2025:i:c:p:230-248
    DOI: 10.1016/j.insmatheco.2025.03.005
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    More about this item

    Keywords

    Optimal portfolio; Portfolio insurance; Mean-variance optimization; Participating life insurance; Non-concave utility maximization;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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