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Optimal asset allocation for a general portfolio of life insurance policies

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  • Huang, Hong-Chih
  • Lee, Yung-Tsung

Abstract

Asset liability matching remains an important topic in life insurance research. The objective of this paper is to find an optimal asset allocation for a general portfolio of life insurance policies. Using a multi-asset model to investigate the optimal asset allocation of life insurance reserves, this study obtains formulae for the first two moments of the accumulated asset value. These formulae enable the analysis of portfolio problems and a first approximation of optimal investment strategies. This research provides a new perspective for solving both single-period and multiperiod asset allocation problems in application to life insurance policies. The authors obtain an efficient frontier in the case of single-period method; for the multiperiod method, the optimal asset allocation strategies can differ considerably for different portfolio structures.

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  • Huang, Hong-Chih & Lee, Yung-Tsung, 2010. "Optimal asset allocation for a general portfolio of life insurance policies," Insurance: Mathematics and Economics, Elsevier, vol. 46(2), pages 271-280, April.
    • Handle: RePEc:eee:insuma:v:46:y:2010:i:2:p:271-280
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    References listed on IDEAS

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    Cited by:

    1. Leung, Andrew P., 2011. "Reactive investment strategies," Insurance: Mathematics and Economics, Elsevier, vol. 49(1), pages 89-99, July.
    2. Huang, Hong-Chih & Lee, Yung-Tsung, 2020. "A study of the differences among representative investment strategies," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 131-149.
    3. Schlütter, Sebastian & Fianu, Emmanuel Senyo & Gründl, Helmut, 2022. "Responsible investments in life insurers' optimal portfolios under solvency constraints," ICIR Working Paper Series 45/22, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    4. Lord Mensah, 2016. "Asset Allocation Brewed Accross African Stock Markets," Proceedings of Economics and Finance Conferences 3205757, International Institute of Social and Economic Sciences.
    5. Bohnert, Alexander & Gatzert, Nadine & Jørgensen, Peter Løchte, 2015. "On the management of life insurance company risk by strategic choice of product mix, investment strategy and surplus appropriation schemes," Insurance: Mathematics and Economics, Elsevier, vol. 60(C), pages 83-97.
    6. Runsheng Gu & Lioudmila Vostrikova & Bruno Séjourné, 2020. "Portfolio optimization of euro-denominated funds in French life insurance," Working Papers hal-03025191, HAL.
    7. Kerem SENEL & A. Bulent PAMUKCU, 2012. "A Comparative Study For Multi-Period Asset Allocation Of Defined Contribution Schemes: Evidence From Turkey," Istanbul Commerce University Journal of Social Sciences, Istanbul Commerce University, vol. 21(1), pages 289-304.

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