Equity Allocation and Portfolio Selection in Insurance: A simplified Portfolio Model
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.
|Date of creation:||22 Jun 1999|
|Date of revision:||23 Jul 1999|
|Note:||Type of document submitted: Postscript; prepared with LaTeX2e;|
|Contact details of provider:|| Web page: http://188.8.131.52|
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- 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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