Optimal Investment Strategies for an Insurer with SAHARA Utility |
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Authors: | ZHAO Qian ZHU Shaohui |
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Affiliation: | School of Statistics and Information, Shanghai University of International Business and Economics, Shanghai, 201620, China |
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Abstract: | In this paper, we consider the optimal investment strategy which maximizes the utility of the terminal wealth of an insurer with SAHARA utility functions. This class of utility functions has non-monotone absolute risk aversion, which is more flexible than the CARA and CRRA utility functions. In the case that the risk process is modeled as a Brownian motion and the stock process is modeled as a geometric Brownian motion, we get the closed-form solutions for our problem by the martingale method for both the constant threshold and when the threshold evolves dynamically according to a specific process. Finally, we show that the optimal strategy is state-dependent. |
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Keywords: | optimal investment strategy,SAHARA utility function insurer,martingale approach, |
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