Optimal investment for insurers with the extended CIR interest rate model
type: Item
instance of: scholarly article
title: Optimal investment for insurers with the extended CIR interest rate model
zbMATH Open document ID: 1406.91198
DOI: 10.1155/2014/129474
author: Mei Choi Chiu
author: Hoi Ying Wong
published in: Abstract and Applied Analysis
publication date: 2019-02-14T00:00:00Z
review text: Summary: A fundamental challenge for insurance companies (insurers) is to strike the best balance between optimal investment and risk management of paying insurance liabilities, especially in a low interest rate environment. The stochastic interest rate becomes a critical factor in this asset-liability management (ALM) problem. This paper derives the closed-form solution to the optimal investment problem for an insurer subject to the insurance liability of compound Poisson process and the stochastic interest rate following the extended CIR model. Therefore, the insurer's wealth follows a jump-diffusion model with stochastic interest rate when she invests in stocks and bonds. Our problem involves maximizing the expected constant relative risk averse (CRRA) utility function subject to stochastic interest rate and Poisson shocks. After solving the stochastic optimal control problem with the HJB framework, we offer a verification theorem by proving the uniform integrability of a tight upper bound for the objective function.
Mathematics Subject Classification ID: 91B30
Mathematics Subject Classification ID: 91G30
Mathematics Subject Classification ID: 60J75
zbMATH DE Number: 7021766
zbMATH Keywords: insurers' optimal investment
zbMATH Keywords: extended CIR interest rate
zbMATH Keywords: jump-diffusion model
Wikidata QID: Q59035325
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/129474
OpenAlex ID: W2166121489
cites work: A theory of the term structure of interest rates
cites work: Homotopy analysis method for boundary-value problem of turbo warrant pricing under stochastic volatility
cites work: Optimal investment strategies in a CIR framework
cites work: Optimal investment strategies in the presence of a minimum guarantee.
cites work: Mean–variance efficiency with extended CIR interest rates
cites work: An investment and consumption problem with CIR interest rate and stochastic volatility
cites work: Optimal investment for insurer with jump-diffusion risk process
cites work: Mean-variance asset-liability management: cointegrated assets and insurance liability
cites work: Optimal investment for an insurer with cointegrated assets: CRRA utility
cites work: Optimal investment for insurers
cites work: Q4032143
cites work: Matrix Riccati equations in control and systems theory
cites work: Generalized Riccati difference and differential equations
cites work: Time-consistent mean-variance hedging of longevity risk: effect of cointegration
cites work: Mean-variance portfolio selection with correlation risk
description: scientific article; zbMATH DE number 7021766