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Optimal Investment and Bounded Ruin Probability: Constant Portfolio Strategies and Mean-variance Analysis 1

Published online by Cambridge University Press:  17 April 2015

Ralf Korn  and
Anke Wiese
Ralf Korn
Affiliation:
Department of Methametics, University of Kaiserslautern and Fraunhofer Institute for Industrial Mathematics, Kaiserslautern, 67653 Kaiserslautern, Germany, E-Mail: [email protected]
Anke Wiese
Affiliation:
School of Mathematical and Computer Sciences and the Maxwell Institute for Mathematical Sciences, Heriot-Watt University, Riccarton, Edinburgh EH14 4AS, United Kingdom, E-Mail: [email protected]
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Abstract

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We study the continuous-time portfolio optimization problem of an insurer. The wealth of the insurer is given by a classical risk process plus gains from trading in a risky asset, modelled by a geometric Brownian motion. The insurer is not only interested in maximizing the expected utility of wealth but is also concerned about the ruin probability. We thus investigate the problem of optimizing the expected utility for a bounded ruin probability. The corresponding optimal strategy in various special classes of possible investment strategies will be calculated. For means of comparison we also calculate the related mean-variance optimal strategies.

Keywords

Ruin ProcessOptimal InvestmentUtility Maximization under Constraints
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 38 , Issue 2 , November 2008 , pp. 423 - 440
Copyright
Copyright © ASTIN Bulletin 2008

Footnotes

1

AMS 2000 subject classifications. 60G35, 90A09, 90A43.

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