Optimal multi-asset investment with no-shorting constraint under mean-variance criterion for an insurer

Junna Bi; Junyi Guo; Lihua Bai

doi:10.1007/s11424-011-8014-7

Optimal multi-asset investment with no-shorting constraint under mean-variance criterion for an insurer

Junna Bi^*
, Junyi Guo
, Lihua Bai

^*Corresponding author for this work

Nankai University

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

This paper considers the optimal investment strategy for an insurer under the criterion of mean-variance. The risk process is a compound Poisson process and the insurer can invest in a risk-free asset and multiple risky assets. This paper obtains the optimal investment policy using the stochastic linear quadratic (LQ) control theory with no-shorting constraint. Then the efficient strategy (optimal investment strategy) and efficient frontier are derived explicitly by a verification theorem with the viscosity solution of Hamilton-Jacobi-Bellman (HJB) equation.

Original language	English
Pages (from-to)	291-307
Number of pages	17
Journal	Journal of Systems Science and Complexity
Volume	24
Issue number	2
DOIs	https://doi.org/10.1007/s11424-011-8014-7
State	Published - Apr 2011
Externally published	Yes

Keywords

HJB equation
mean-variance portfolio selection
optimal investment
verification theorem
viscosity solution

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10.1007/s11424-011-8014-7

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abstract = "This paper considers the optimal investment strategy for an insurer under the criterion of mean-variance. The risk process is a compound Poisson process and the insurer can invest in a risk-free asset and multiple risky assets. This paper obtains the optimal investment policy using the stochastic linear quadratic (LQ) control theory with no-shorting constraint. Then the efficient strategy (optimal investment strategy) and efficient frontier are derived explicitly by a verification theorem with the viscosity solution of Hamilton-Jacobi-Bellman (HJB) equation.",

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AB - This paper considers the optimal investment strategy for an insurer under the criterion of mean-variance. The risk process is a compound Poisson process and the insurer can invest in a risk-free asset and multiple risky assets. This paper obtains the optimal investment policy using the stochastic linear quadratic (LQ) control theory with no-shorting constraint. Then the efficient strategy (optimal investment strategy) and efficient frontier are derived explicitly by a verification theorem with the viscosity solution of Hamilton-Jacobi-Bellman (HJB) equation.

KW - HJB equation

KW - mean-variance portfolio selection

KW - optimal investment

KW - verification theorem

KW - viscosity solution

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ER -

Optimal multi-asset investment with no-shorting constraint under mean-variance criterion for an insurer

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Keywords

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