Jarraya, Bilel and Bouri, Abdelfettah (2013): A Theoretical Assessment on Optimal Asset Allocations in Insurance Industry. Published in: International Journal of Finance & Banking Studies , Vol. 2, No. 4 (2013): pp. 30-44.
Preview |
PDF
MPRA_paper_53534.pdf Download (392kB) | Preview |
Abstract
In recent years the financial markets known a rapid development and become more and more complex. So, many regulatory requirements, focused on banks as well as insurance sector, have been developed. These regulatory are concentrated essentially on business risk control and required capital to cover risks. These requirements have influenced the asset allocation issue in insurance industry. These requirements have influenced the asset allocation issue in insurance industry. This section is interested by this issue. In first time it highlights some research works in this issue. Then we will investigate the relation between Solvency and optimal asset allocation. Finally we will explore the principal used methods in modeling asset and in choosing the optimal portfolio composition.
Item Type: | MPRA Paper |
---|---|
Original Title: | A Theoretical Assessment on Optimal Asset Allocations in Insurance Industry |
English Title: | A Theoretical Assessment on Optimal Asset Allocations in Insurance Industry |
Language: | English |
Keywords: | Portfolio investment; Optimal asset allocation; Solvency; Expected return; Expected utility; Assets modeling; Risky assets; Risk free asset; Insurance companies. |
Subjects: | G - Financial Economics > G2 - Financial Institutions and Services G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other |
Item ID: | 53534 |
Depositing User: | Dr Bilel JARRAYA |
Date Deposited: | 10 Feb 2014 01:14 |
Last Modified: | 26 Sep 2019 14:28 |
References: | Andersen, L., & Andreasen, J., (2000). Jump-Diffusion Processes: Volatility Smile Fitting and Numerical Methods for Option Pricing. Review of Derivatives Research, 4, 231–262. Bellhouse, D. R., & Panjer, H. H., (1981). Stochastic modelling of interest rates with applications to life contingencies—Part II. Journal of Risk and Insurance, 47, 628–637. Black, F., & Litterman, R., (1990). Asset Allocation: Combining Investor Views with Market Equilibrium. Discussion paper, Goldman, Sachs & Co. Black, F., & Litterman, R., (1992). Global Portfolio Optimization. Financial Analysts Journal, 48, 28–43. Black, F., & Scholes, M., (1973). The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81, 637–659. Brennan, M. J., Schwartz, E. S., & Lagnado, R., (1997). Strategic Asset Allocation. Journal of Economic Dynamics and Control, 21, 1377–1403. Brennan, M., & Xia, Y., (2002). Dynamic Asset Allocation under Inflation. Journal of Finance, 57, 1201–1238. Browne, S., (1995). Optimal investment policies for a firm with a random risk process: exponential utility and minimizing of the probability of ruin. Mathematics of Operations Research, 20, 937–957. Cairns, A. J. G., (2000). Some notes on the dynamics and optimal control of stochastic pension fund models in continuous time, ASTIN Bulletin, 30, 19–55. Campbell, J. Y., & Viceira, L. M., (1999). Consumption and Portfolio Decisions when Expected Returns are Time Varying. Quarterly Journal of Economics, 114, 433–495. Campbell, J. Y., Cocco, J., Gomes, F., & Viceira, L. M., (2001). Stock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived Investor. European Finance Review, 5, 269–292. Carino, D. R., Kent, T., Myers, D. H., Stacey, C., Sylvanus, M., Turner, A .L., Watanabe, K., & Ziemba, W. T., (1994). The Russell–Yasuda Kasai model: An asset/liability model for a Japanese insurance company using multistage stochastic programming. Interfaces, 24, 29–49. Carr, P., Geman, H., Madan, D. B., & Yor, M., (2002). The Fine Structure of Asset Returns : an Empirical Investigation. Journal of Business, 75, 2, 305–332. Chacko, G., & Viceira, L. M., (2005). Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets. The Review of Financial Studies, 18, 4, 1369-1402. Chiu, M. C., & Li, D., (2006). Asset and liability management under a continuous-time mean–variance optimization framework. Insurance: Mathematics and Economics, 39, 330–355. Chopra, V. K.., (1993). Improving Optimization. Journal of Investing, 8, 51–59. Cont, R., & Voltchkova, E., (2005). A Finite Difference Scheme for Option Pricing in Jump Diffusion and Exponential Lévy Models. SIAM Journal on Numerical Analysis, 43, 4, 1596–1626. Cont, R., (2001). Empirical Properties of Asset Returns : Stylized Facts and Statistical Issues. Quantitative Finance, 1, 223–236. Cox, J. C., Huang, C.-f., (1989). Optimal consumption and portfolio policies when asset prices follow a diffusion process. Journal of Economic Theory 49, 33–83. Cox, J. C., Ingersoll, J. E., & Ross, S.A., (1985). A theory of the term structure of interest rates. Econometrica, 53, 385–407. Craft, T. M., (2005). Impact of pension plan liabilities on real estate investment. Journal of Portfolio Management, 31, 23–31. Dempster, M. A. H., (1980). Stochastic Programming. Academic Press, London. Detemple, J., & Rindisbacher, M., (2008). Dynamic asset liability management with tolerance for limited shortfalls. Insurance: Mathematics and Economics, 43, 281–294. Dhaene, J., (1989). Stochastic interest rates and autoregressive integrated moving average processes. ASTIN Bulletin, 19, 131–138. Emms, P., Haberman, S., (2007). Asymptotic and numerical analysis of the optimal investment strategy for an insurer. Insurance: Mathematics and Economics, 40, 113–134. Frost, P., & Savarino, J., (1988). For Better Performance Constrain Portfolio Weights. Journal of Portfolio Management, 15, 29–34. Haberman, S., & Vigna, E., (2002). Optimal investment strategies and risk measures in defined contribution pension schemes. Insurance: Mathematics and Economics, 31, 35–69. Heath, D., Jarrow, R.A., & Morton, A., (1990). Bond pricing and the term structure of interest rates: A new methodology for contingent claims valuation. Econometrica, 60, 77–105. Hipp, C., & Plum, M., (2000). Optimal investment for insurers. Insurance: Mathematics and Economics, 26, 215-228 Hipp, C., & Vogt, M., (2003). Optimal dynamic XL reinsurance. ASTIN Bulletin 33, 193-208. Hipp, C., (2002). Stochastic control with applications in insurance. Report, University of Karlsruhe. Ho, T. S. Y., & Lee, S. B., (1986). Term structure movements and pricing interest rate contingent claims. Journal of Finance, 41, 1011–1029. Hojgaard, B., Taksar, M., (2000). Optimal risk control for large corporation in the presence of returns on investments. Finance and Stochastics, 5, 527–547. Hubalak, F., & Schachermayer, W., (2004). Optimizing expected utility of dividend payments for a Brownian risk process and a peculiar nonlinear ODE. Insurance: Mathematics and Economics, 34, 193–225. Hurlimann, W., (2002). On the accumulated aggregate surplus of a life portfolio. Insurance: Mathematics and Economics, 30, 27–35. Jagannathan, R., & Ma, T., (2003). Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps. Journal of Finance, 58, 1651–1684. Kim, T. S., & Omberg, E., (1996). Dynamic Nonmyopic Portfolio Behavior. Review of Financial Studies, 9, 141–61. Korn, R., (2005). Worst-case scenario investment for insurers. Insurance: Mathematics and Economics, 36, 1–11. Kou, S. G., (2002). A Jump-Diffusion Model for Option Pricing, Management Science, 48, 1086–1101. Lintner, J., (1965). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Review of Economics and Statistics, 47, 13–37. Liu, J., (2001). Portfolio Selection in Stochastic Environments. Working Paper, University of California, Los Angeles. Lynch, A. W., & Balduzzi, P., (2000). Predictability and Transaction Costs: The Impact on Rebalancing Rules and Behavior. Journal of Finance, 55, 2285–2309. Lynch, A. W., (2001). Portfolio Choice and Equity Characteristics: Characterizing the Hedging Demands Induced by Return Predictability. Journal of Financial Economics, 62, 67–130. Marceau, E., & Gaillardetz, P., (1999). On life insurance reserves in a stochastic mortality and interest rates environment. Insurance: Mathematics and Economics, 25, 261–280. Markowitz, H. M., (1952). Portfolio selection. Journal of Finance, 7, 77–91. Merton, R. C. (1976). Option Pricing When Underlying Stock Returns are Discontinuous. Journal of Financial Economics, 3, 125–144. Merton, R. C., (1969). Lifetime Portfolio Selection Under Uncertainty: The Continuous Time Case. Review of Economics and Statistics, 51, 247–257. Merton, R. C., (1971). Optimum Consumption and Portfolio Rules in a Continuous-Time Model. Journal of Economic Theory, 3, 373–413. Merton, R. C., (1973). An Intertemporal Asset Pricing Model. Econometrica, 41, 867–888. Michaud, R. O., (1998). Efficient Asset Management. Harvard Business School Press, Boston. Panjer, H. H., & Bellhouse, D. R., (1980). Stochastic modelling of interest rates with applications to life contingencies. Journal of Risk and Insurance, 47, 91–110. Parker, G., (1994). Moments of the present value of a portfolio of policies. Scandinavian Actuarial Journal, 53–67. Paulsen, J., (2003). Optimal dividend payouts for diffusions with solvency constraints. Finance and Stochastics, 4, 457–474. Samuelson, P., (1969). Lifetime Portfolio Selection by Dynamic Stochastic Programming. Review of Economics and Statistics, 51, 239–246. Schmidli, H., (2002). On minimising the ruin probability by investment and reinsurance. Annals of Applied Probability, 12, 890-907. Sharpe, W. F., & Tint, I. G., (1990). Liabilities: A new approach. Journal of Portfolio Management, 16, 5–10. Sharpe, W. F., (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19, 425–442. Sherris, M., (1992). Portfolio selection and matching: A synthesis. Journal of the Institute of Actuaries, 119, 1, 87–105. Sherris, M., (2006). Solvency, capital allocation, and fair rate of return in insurance. The Journal of Risk and Insurance, 73, 1, 71–96. Skiadas, C., & Schroder, M., (1999). Optimal Consumption and Portfolio Selection with Stochastic Differential Utility. Journal of Economic Theory, 89, 68–126. Teplá, L., (2001). Optimal investment with minimum performance constraints. Journal of Economic Dynamics and Contro , 25, 1629–1645. Tobin, J., (1958). Liquidity Preference as Behavior Towards Risk. Review of Economic Studies, 25, 68–85. Vasicek, O., (1977). An equilibrium characterization of the term structure. Journal of Financial Economics, 5, 177–188. Wachter, J., (2002). Portfolio and Consumption Decisions under Mean-Reverting Returns: An Exact Solution for Complete Markets. Journal of Financial and Quantitative Analysis, 37, 63–91. Wang, Z., Xia, J., & Zhang, L., (2007). Optimal investment for an insurer: The martingale approach. Insurance: Mathematics and Economics, 40, 322–334. Waters, H. R., (1978). The moments and distributions of actuarial functions. Journal of the Institute of Actuaries, 105, 61–75. Wilkie, A. D., (1985). Portfolio selection in the presence of fixed liabilities: A comment on the matching of assets to liabilities. Journal of Institute of Actuaries, 112, 229–277. Wise, A. J., (1984). A theoretical analysis of the matching of assets to liabilities. Journal of Institute of Actuaries, 111, 375–402. Wise, A. J., (1987). Matching and portfolio selection: Part 1. Journal of Institute of Actuaries, 114, 113–133. Xia, Y., (2001). Learning about Predictability: The Effects of Parameter Uncertainty on Dynamic Asset Allocation. Journal of Finance, 56, 205–46. Yu, T-Y., Tsai, C., Huang, H.-T., (2010). Applying simulation optimization to the asset allocation of a property–casualty insurer. European Journal of Operational Research 207, 499–507. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/53534 |