An optimal investment strategy aimed at maximizing the expected utility across all intermediate capital levels

J. Cerda-Hernandez, A. Sikov and A. Ramos

Papers from arXiv.org

Abstract: This study investigates an optimal investment problem for an insurance company operating under the Cramer-Lundberg risk model, where investments are made in both a risky asset and a risk-free asset. In contrast to other literature that focuses on optimal investment and/or reinsurance strategies to maximize the expected utility of terminal wealth within a given time horizon, this work considers the expected value of utility accumulation across all intermediate capital levels of the insurer. By employing the Dynamic Programming Principle, we prove a verification theorem, in order to show that any solution to the Hamilton-Jacobi-Bellman (HJB) equation solves our optimization problem. Subject to some regularity conditions on the solution of the HJB equation, we establish the existence of the optimal investment strategy. Finally, to illustrate the applicability of the theoretical findings, we present numerical examples.

Date: 2022-07, Revised 2024-06
New Economics Papers: this item is included in nep-rmg and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2207.02947 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2207.02947

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).