Optimal investment and risk control policies for an insurer: Expected utility maximization

Bin Zou and Abel Cadenillas

Insurance: Mathematics and Economics, 2014, vol. 58, issue C, 57-67

Abstract: Motivated by the AIG bailout case in the financial crisis of 2007–2008, we consider an insurer who wants to maximize his/her expected utility of terminal wealth by selecting optimal investment and risk control strategies. The insurer’s risk process is modeled by a jump-diffusion process and is negatively correlated with the capital gains in the financial market. We obtain explicit solutions of optimal strategies for various utility functions.

Keywords: Jump-diffusion process; Martingale approach; HARA utility; CARA utility; Quadratic utility (search for similar items in EconPapers)
JEL-codes: C61 E32 E44 G11 G22 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:58:y:2014:i:c:p:57-67

DOI: 10.1016/j.insmatheco.2014.06.006

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