Cahiers du CEREMADE

Unité Mixte de Recherche du C.N.R.S. N°7534
 
Abstract : A quadratic discrete time probabilistic model, for optimal portfolio selection, under risk constraint, is introduced in the context of (re-) insurance and finance. The portfolio is composed of contracts with arbitrary underwriting and maturity times. For positive values of underwriting levels, the expected value of the accumulated final result is optimized under constraints on its variance and on annual Returns On Equity. Existence of a unique solution is proved and a Lagrangian formalism is given. An effective method for solving the Euler-Lagrange equations is developed. The approximate determination of the multipliers is discussed. This basic model, which can include both assets and liabilities, is an important building block for more general models, with constraints also on non-solvency probabilities, market-shares, short-fall distributions and Values at Risk.
 
 
EQUITY ALLOCATION AND PORTFOLIO SELECTION IN INSURANCE : A SIMPLIFIED PORTFOLIO MODEL
TAFLIN Erik
2000-37
13-11-2000
 
Université de PARIS - DAUPHINE
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