Optimal investment and bounded ruin probability: Constant portfolio strategies and mean-variance analysis

Ralf Korn, Anke Wiese

Research output: Contribution to journalArticle

Abstract

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. © 2008 by Astin Bulletin. All rights reserved.

Original languageEnglish
Pages (from-to)423-440
Number of pages18
JournalASTIN Bulletin: The Journal of the IAA
Volume38
Issue number2
DOIs
Publication statusPublished - Nov 2008

Keywords

  • Optimal investment
  • Ruin process
  • Utility maximization under constraints

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