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Equity Allocation and Portfolio Selection in Insurance

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  • Erik Taflin

    (AXA)

Abstract

A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both liabilities and assets, it is proved that the model has solutions respecting constraints on ROE's, ruin probabilities and market shares currently in practical use. Solutions define global and optimal risk management strategies of the company. Mathematical existence results and tools, such as the inversion of the linear part of the Euler-Lagrange equations, developed in a preceding paper in the context of a simplified model are essential for the mathematical and numerical construction of solutions of the model.

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  • Erik Taflin, 1999. "Equity Allocation and Portfolio Selection in Insurance," Papers math/9907160, arXiv.org.
    • Handle: RePEc:arx:papers:math/9907160
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    Cited by:

    1. Erik Taflin, 1999. "Equity Allocation and Portfolio Selection in Insurance: A simplified Portfolio Model," GE, Growth, Math methods 9906002, University Library of Munich, Germany, revised 23 Jul 1999.
    2. Medernach, Emmanuel & Sanlaville, Eric, 2012. "Fair resource allocation for different scenarios of demands," European Journal of Operational Research, Elsevier, vol. 218(2), pages 339-350.

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