Convex order approximations in the case of cash flows of mixed signs

Jan Dhaene, Marc Goovaerts, Michèle Vanmaele and Koen Van Weert

Insurance: Mathematics and Economics, 2012, vol. 51, issue 2, 249-256

Abstract: In Van Weert et al. (2010), results are obtained showing that, when allowing some of the cash flows to be negative, convex order lower bound approximations can still be used to solve general investment problems in a context of provisioning or terminal wealth. In this paper, a correction and further clarification of the reasoning of Van Weert et al. (2010) are given, thereby significantly expanding the scope of problems and cash flow patterns for which the terminal wealth or initial provision can be accurately approximated. Also an interval for the probability level is derived in which the quantiles of the lower bound approximation can be computed. Finally, it is shown how one can move from a context of provisioning of future obligations to a saving and terminal wealth problem by inverting the time axis.

Keywords: Convex order approximations; Comonotonicity; Cash flows of mixed signs; Terminal wealth; Provisioning (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:51:y:2012:i:2:p:249-256

DOI: 10.1016/j.insmatheco.2012.04.003

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