Article ID: | iaor20031938 |
Country: | Japan |
Volume: | 45 |
Issue: | 4 |
Start Page Number: | 471 |
End Page Number: | 489 |
Publication Date: | Dec 2002 |
Journal: | Journal of the Operations Research Society of Japan |
Authors: | Yumae Shoji |
Keywords: | allocation: resources, control, financial, management, risk, optimization |
I consider a participating policy as a contingent claim whose payoff is similar to a call option. The underlying asset of the claim is an asset portfolio continuously controlled by an insurance company. I derive an efficient frontier of the equity return of the company, as well as the trading strategy to realize efficient portfolios, by utilizing the martingale method for optimal portfolio selection problems. Some numerical examples indicate that the higher expected rate of return of the company is required, the more investment in risky assets is needed, and that probability of bonus payment is positive.