IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v05y2002i03ns0219024902001328.html
   My bibliography  Save this article

Equity Allocation And Portfolio Selection In Insurance: A Simplified Portfolio Model

Author

Listed:
  • ERIK TAFLIN

    (CEREMADE, Université Paris IX — Dauphine, Place du Maréchal-de-Lattre-de-Tassigny, 75775 Paris (Cedex 16), France)

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.

Suggested Citation

  • Erik Taflin, 2002. "Equity Allocation And Portfolio Selection In Insurance: A Simplified Portfolio Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 223-253.
    • Handle: RePEc:wsi:ijtafx:v:05:y:2002:i:03:n:s0219024902001328
    DOI: 10.1142/S0219024902001328
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024902001328
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024902001328?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ivar Ekeland & Erik Taflin, 2003. "A theory of bond portfolios," Papers math/0301278, arXiv.org, revised May 2005.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:05:y:2002:i:03:n:s0219024902001328. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.