Optimal investment strategy and liability ratio for insurer with Lévy risk process

Authors : Mustafa Asim OZALP, Kasirga YİLDİRAK, Yeliz YOLCU OKUR

Pages : 1232-1249

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Publication Date : 2019-08-08

Article Type : Research Paper

Abstract :We investigate an insurer`s optimal investment and liability problem by maximizing the expected terminal wealth under different utility functions. The insurer`s aggregate claim payments are modeled by a Lévy risk process. We assume that the financial market consists of a riskless and a risky assets. It is also assumed that the insurer`s liability is negatively correlated with the return of the risky asset. The closed-form solution for the optimal investment and liability ratio is obtained using Pontryagin`s Maximum Principle. Moreover, the solutions of the optimal control problems are examined and compared to the findings where the jump sizes are assumed to be constant.
Keywords : Lévy risk process, Control theory, Pontryagins maximum principle, Optimal investment strategy, Optimal liability ratio