Operations Research Transactions ›› 2010, Vol. 14 ›› Issue (2): 106-118.
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ZENG Yan, LI Zhong-Fei
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Abstract: In practice, investment behaviors of an insurer will be subjected to some constraints from Insurance Law and the insurer's own risk management. Additionally, an insurer should draw certain reserve to satisfy regulatory requirements. Therefore, in this paper we suppose the time when its surplus first comes up to the floor level of reserve as the ``ruin'' time; the target of the insurance company is to minimize the ``ruin'' probability; the surplus process of the insurer is derived by a diffusion model and its investment behaviors are subjected to a linear constraint. By solving the corresponding HJB equation, the optimal investment strategy and value function are derived explicitly when the insurer is allowed to investment on a risk-free asset and a risky asset. In the end, economic analysis and numerical examples are provided.
ZENG Yan, LI Zhong-Fei. Optimal Investment Strategy for Insurers under Linear Constraint[J]. Operations Research Transactions, 2010, 14(2): 106-118.
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