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Optimal asset allocation for participating contracts with mortality risk under minimum guarantee

Author

Listed:
  • Sang Wu
  • Yinghui Dong
  • Wenxin Lv
  • Guojing Wang

Abstract

We investigate an optimal investment problem of participating insurance contracts with mortality risk under minimum guarantee. The insurer aims to maximize the expected utility of the terminal payoff. Due to its piecewise payoff structure, this optimization problem is a non-concave utility maximization problem. We adopt a concavification technique and a Lagrange dual method to solve the problem and derive the representations of the optimal wealth process and trading strategies. We also carry out some numerical analysis to show how the portfolio insurance constraint impacts the optimal terminal wealth.

Suggested Citation

  • Sang Wu & Yinghui Dong & Wenxin Lv & Guojing Wang, 2020. "Optimal asset allocation for participating contracts with mortality risk under minimum guarantee," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 49(14), pages 3481-3497, July.
    • Handle: RePEc:taf:lstaxx:v:49:y:2020:i:14:p:3481-3497
    DOI: 10.1080/03610926.2019.1589518
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    Cited by:

    1. Ankush Agarwal & Christian-Oliver Ewald & Yongjie Wang, 2023. "Hedging longevity risk in defined contribution pension schemes," Computational Management Science, Springer, vol. 20(1), pages 1-34, December.
    2. Anne MacKay & Adriana Ocejo, 2022. "Portfolio Optimization With a Guaranteed Minimum Maturity Benefit and Risk-Adjusted Fees," Methodology and Computing in Applied Probability, Springer, vol. 24(2), pages 1021-1049, June.

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