Pub Date : 2025-02-17DOI: 10.1016/j.insmatheco.2025.02.002
Yuanmin Jin , Zhuo Jin , Jiaqin Wei
The development of electric vehicles has led to an expansion of Electric Vehicle Charging Stations (EVCSs). However, this expansion also brings about significant amount of risks, resulting in financial loss for EVCSs. To address this issue, this paper proposes an optimal insurance model based on a Stackelberg game between an insurer and a risk-averse EVCS operator. In the game, the insurer sets the insurance premium, and the EVCS operator decides on her charging price and ceded loss function. The paper explores the existence of the optimal solution of the game under the assumption of n-point distributed loss, and also characterizes the optimal solution if the loss follows two-point distribution. Finally, numerical examples are provided to demonstrate the effects of parameters on the optimal solution.
{"title":"Insurance contract for electric vehicle charging stations: A Stackelberg game-theoretic approach","authors":"Yuanmin Jin , Zhuo Jin , Jiaqin Wei","doi":"10.1016/j.insmatheco.2025.02.002","DOIUrl":"10.1016/j.insmatheco.2025.02.002","url":null,"abstract":"<div><div>The development of electric vehicles has led to an expansion of Electric Vehicle Charging Stations (EVCSs). However, this expansion also brings about significant amount of risks, resulting in financial loss for EVCSs. To address this issue, this paper proposes an optimal insurance model based on a Stackelberg game between an insurer and a risk-averse EVCS operator. In the game, the insurer sets the insurance premium, and the EVCS operator decides on her charging price and ceded loss function. The paper explores the existence of the optimal solution of the game under the assumption of <em>n</em>-point distributed loss, and also characterizes the optimal solution if the loss follows two-point distribution. Finally, numerical examples are provided to demonstrate the effects of parameters on the optimal solution.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 61-81"},"PeriodicalIF":1.9,"publicationDate":"2025-02-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143438179","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-09DOI: 10.1016/j.insmatheco.2025.02.001
Meryem Yankol Schalck
As technology and the economy continue to grow, fraud has a significant negative impact on business and society, and insurance fraud remains an important issue, posing challenges in both detection and prevention. This article provides a direct cost-sensitive learning approaches on enhancing traditional motor insurance fraud detection by leveraging real-world data sets. In this approach, the results are obtained by using the information available at the opening of the claim, FNOL. The data set (FNOL) contains numerical, categorical, and textual variables. The results show that machine learning techniques perform better statistically and can also be more effective than standard approaches in reducing fraud-related costs. Extreme Gradient Boosting (XGB) outperforms both cost-sensitive and cost-insensitive approaches based on performance measures. Our study indicates that a cost-sensitive strategy delivers greater financial benefits than a cost-insensitive approach.
{"title":"Auto insurance fraud detection: Leveraging cost sensitive and insensitive algorithms for comprehensive analysis","authors":"Meryem Yankol Schalck","doi":"10.1016/j.insmatheco.2025.02.001","DOIUrl":"10.1016/j.insmatheco.2025.02.001","url":null,"abstract":"<div><div>As technology and the economy continue to grow, fraud has a significant negative impact on business and society, and insurance fraud remains an important issue, posing challenges in both detection and prevention. This article provides a direct cost-sensitive learning approaches on enhancing traditional motor insurance fraud detection by leveraging real-world data sets. In this approach, the results are obtained by using the information available at the opening of the claim, FNOL. The data set (FNOL) contains numerical, categorical, and textual variables. The results show that machine learning techniques perform better statistically and can also be more effective than standard approaches in reducing fraud-related costs. Extreme Gradient Boosting (XGB) outperforms both cost-sensitive and cost-insensitive approaches based on performance measures. Our study indicates that a cost-sensitive strategy delivers greater financial benefits than a cost-insensitive approach.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 44-60"},"PeriodicalIF":1.9,"publicationDate":"2025-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143419301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-06DOI: 10.1016/j.insmatheco.2025.01.009
Philipp Aigner
Most insurers in the European Union determine their regulatory capital requirements based on the standard formula of Solvency II. However, there is evidence that the standard formula inaccurately reflects insurers' risk situation and may provide misleading steering incentives. In the second pillar, Solvency II requires insurers to perform a so-called “Own Risk and Solvency Assessment” (ORSA). In their ORSA, insurers must establish their own risk measurement approaches, including those based on scenarios, in order to derive suitable risk assessments and address shortcomings of the standard formula. The idea of this paper is to identify scenarios in such a way that the standard formula in connection with the ORSA provides a reliable basis for risk management decisions. Using an innovative method for scenario identification, our approach allows for a simple but precise assessment of marginal and even non-marginal portfolio changes. We numerically evaluate the proposed approach in the context of market risk employing an internal model from the academic literature and the Solvency Capital Requirement (SCR) calculation under Solvency II.
{"title":"Identifying scenarios for the own risk and Solvency assessment of insurance companies","authors":"Philipp Aigner","doi":"10.1016/j.insmatheco.2025.01.009","DOIUrl":"10.1016/j.insmatheco.2025.01.009","url":null,"abstract":"<div><div>Most insurers in the European Union determine their regulatory capital requirements based on the standard formula of Solvency II. However, there is evidence that the standard formula inaccurately reflects insurers' risk situation and may provide misleading steering incentives. In the second pillar, Solvency II requires insurers to perform a so-called “Own Risk and Solvency Assessment” (ORSA). In their ORSA, insurers must establish their own risk measurement approaches, including those based on scenarios, in order to derive suitable risk assessments and address shortcomings of the standard formula. The idea of this paper is to identify scenarios in such a way that the standard formula in connection with the ORSA provides a reliable basis for risk management decisions. Using an innovative method for scenario identification, our approach allows for a simple but precise assessment of marginal and even non-marginal portfolio changes. We numerically evaluate the proposed approach in the context of market risk employing an internal model from the academic literature and the Solvency Capital Requirement (SCR) calculation under Solvency II.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 30-43"},"PeriodicalIF":1.9,"publicationDate":"2025-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143386423","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-03DOI: 10.1016/j.insmatheco.2025.01.007
Seung Yeon Jeong, Iqbal Owadally, Steven Haberman, Douglas Wright
Evidence from panel surveys of households, collected over several years and in different countries, shows that people's perception about their remaining lifetime deviates from actuarial data. This has consequences for consumption, savings and investment over an individual's financial life cycle, and in particular for retirement planning and the purchase of annuities. We use data from the U.S. Survey of Consumer Finances to estimate subjective survival probabilities at different ages. This relies on two different methods of adjusting survival probabilities from a suitable life table. We observe survival pessimism at younger ages and optimism at older ages, consistent with the literature. We optimize numerically for consumption, investment and annuitization in a life-cycle model where individuals receive stochastic labour income and invest in a risk-free asset and in stock whose returns are imperfectly correlated with wages, and where they can annuitize their wealth at retirement. We demonstrate that there is some under-saving before retirement, over-saving post-retirement, and under-annuitization when subjective survival beliefs are used, relative to objective survival expectations. These effects are fairly small, irrespective of the method employed to estimate subjective mortality. Subjective survival beliefs do not therefore fully explain household finance puzzles such as the “annuity puzzle”, i.e. observed lower-than-optimal demand for annuities. This conclusion is robust to variations in risk preferences, in the labour income profile, and in the loading factored by insurers in annuity prices.
{"title":"Subjective survival beliefs and the life-cycle model","authors":"Seung Yeon Jeong, Iqbal Owadally, Steven Haberman, Douglas Wright","doi":"10.1016/j.insmatheco.2025.01.007","DOIUrl":"10.1016/j.insmatheco.2025.01.007","url":null,"abstract":"<div><div>Evidence from panel surveys of households, collected over several years and in different countries, shows that people's perception about their remaining lifetime deviates from actuarial data. This has consequences for consumption, savings and investment over an individual's financial life cycle, and in particular for retirement planning and the purchase of annuities. We use data from the U.S. Survey of Consumer Finances to estimate subjective survival probabilities at different ages. This relies on two different methods of adjusting survival probabilities from a suitable life table. We observe survival pessimism at younger ages and optimism at older ages, consistent with the literature. We optimize numerically for consumption, investment and annuitization in a life-cycle model where individuals receive stochastic labour income and invest in a risk-free asset and in stock whose returns are imperfectly correlated with wages, and where they can annuitize their wealth at retirement. We demonstrate that there is some under-saving before retirement, over-saving post-retirement, and under-annuitization when subjective survival beliefs are used, relative to objective survival expectations. These effects are fairly small, irrespective of the method employed to estimate subjective mortality. Subjective survival beliefs do not therefore fully explain household finance puzzles such as the “annuity puzzle”, i.e. observed lower-than-optimal demand for annuities. This conclusion is robust to variations in risk preferences, in the labour income profile, and in the loading factored by insurers in annuity prices.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 11-29"},"PeriodicalIF":1.9,"publicationDate":"2025-02-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143221735","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-30DOI: 10.1016/j.insmatheco.2025.01.008
Haibo Liu
We study utility indifference pricing of a catastrophe (CAT) bond subject to CAT intensity and severity uncertainty for an uncertainty averse representative agent. Assuming the agent has an exponential utility function, we derive her robust ask and bid indifference prices of the CAT bond that are robust to adverse uncertain scenarios. We show that the agent's bid-ask spread increases with both her risk aversion and uncertainty aversion. Moreover, the CAT intensity and CAT severity distribution in the worst-case scenario depend on her trading position.
{"title":"Robust indifference valuation of catastrophe bonds","authors":"Haibo Liu","doi":"10.1016/j.insmatheco.2025.01.008","DOIUrl":"10.1016/j.insmatheco.2025.01.008","url":null,"abstract":"<div><div>We study utility indifference pricing of a catastrophe (CAT) bond subject to CAT intensity and severity uncertainty for an uncertainty averse representative agent. Assuming the agent has an exponential utility function, we derive her robust ask and bid indifference prices of the CAT bond that are robust to adverse uncertain scenarios. We show that the agent's bid-ask spread increases with both her risk aversion and uncertainty aversion. Moreover, the CAT intensity and CAT severity distribution in the worst-case scenario depend on her trading position.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 1-10"},"PeriodicalIF":1.9,"publicationDate":"2025-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143138042","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-27DOI: 10.1016/j.insmatheco.2025.01.006
Mario Ghossoub, Bin Li, Benxuan Shi
This paper contributes to the literature on Stackelberg equilibria (Bowley optima) in monopolistic centralized sequential-move insurance markets in several ways. We consider a class of premium principles defined as expectations of increasing and convex functions of the indemnities. We refer to these as convex-loaded premium principles. Our analysis restricts the ex ante admissible class of indemnity functions to the two most popular and practically relevant classes: the deductible indemnities and the proportional indemnities, both of which satisfy the so-called no-sabotage condition. We study Bowley optimality of premium principles within the class of convex-loaded premium principles, when the indemnity functions are either of the deductible type or of the coinsurance type. Assuming that the policyholder is a risk-averse expected-utility maximizer, while the insurer is a risk-neutral expected-profit maximizer, we find that the expected-value premium principle is Bowley optimal for proportional indemnities, while the stop-loss premium principle is Bowley optimal for deductible indemnities under a mild condition. Methodologically, we introduce a novel dual approach to characterize Bowley optima.
{"title":"Bowley-optimal convex-loaded premium principles","authors":"Mario Ghossoub, Bin Li, Benxuan Shi","doi":"10.1016/j.insmatheco.2025.01.006","DOIUrl":"10.1016/j.insmatheco.2025.01.006","url":null,"abstract":"<div><div>This paper contributes to the literature on Stackelberg equilibria (Bowley optima) in monopolistic centralized sequential-move insurance markets in several ways. We consider a class of premium principles defined as expectations of increasing and convex functions of the indemnities. We refer to these as <em>convex-loaded premium principles</em>. Our analysis restricts the <em>ex ante</em> admissible class of indemnity functions to the two most popular and practically relevant classes: the deductible indemnities and the proportional indemnities, both of which satisfy the so-called no-sabotage condition. We study Bowley optimality of premium principles within the class of convex-loaded premium principles, when the indemnity functions are either of the deductible type or of the coinsurance type. Assuming that the policyholder is a risk-averse expected-utility maximizer, while the insurer is a risk-neutral expected-profit maximizer, we find that the <em>expected-value premium principle</em> is Bowley optimal for proportional indemnities, while the <em>stop-loss premium principle</em> is Bowley optimal for deductible indemnities under a mild condition. Methodologically, we introduce a novel <em>dual approach</em> to characterize Bowley optima.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"121 ","pages":"Pages 157-180"},"PeriodicalIF":1.9,"publicationDate":"2025-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144366","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-23DOI: 10.1016/j.insmatheco.2025.01.005
Tim J. Boonen , Maurice Koster
We aim to share risky endowments among finitely many agents, subject to liquidity constraints. We axiomatically characterize baseline solutions, which use a baseline vector of fixed contributions and a rationing method. We propose a general fairness condition, that uniquely determines these fixed contributions. The fairness condition is flexible enough to allow for the use of any capital allocation rule. One rule stands out as a K-fair solution: the one implied by the constrained egalitarian rationing rule. It is the unique rule satisfying a lower bound on taking part of the risk, a composition property, and null consistency. Furthermore, we provide two more characterizations of this rule; one based on local symmetry and one based on minimax expected contributions under truncation.
{"title":"Axiomatic risk sharing and capital allocation","authors":"Tim J. Boonen , Maurice Koster","doi":"10.1016/j.insmatheco.2025.01.005","DOIUrl":"10.1016/j.insmatheco.2025.01.005","url":null,"abstract":"<div><div>We aim to share risky endowments among finitely many agents, subject to liquidity constraints. We axiomatically characterize <em>baseline</em> solutions, which use a baseline vector of fixed contributions and a rationing method. We propose a general fairness condition, that uniquely determines these fixed contributions. The fairness condition is flexible enough to allow for the use of any capital allocation rule. One rule stands out as a <strong><em>K</em></strong>-fair solution: the one implied by the constrained egalitarian rationing rule. It is the unique rule satisfying a lower bound on taking part of the risk, a composition property, and null consistency. Furthermore, we provide two more characterizations of this rule; one based on local symmetry and one based on minimax expected contributions under truncation.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"121 ","pages":"Pages 133-143"},"PeriodicalIF":1.9,"publicationDate":"2025-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-17DOI: 10.1016/j.insmatheco.2025.01.004
Yang Shen, Michael Sherris, Yawei Wang, Jonathan Ziveyi
This paper presents a novel combo insurance product design consisting of a variable annuity contract embedded with guaranteed minimum income benefit and long-term care insurance riders. This combo product provides enhanced benefits when the policyholder is functionally disabled. The policyholder and provider's joint optimal decision is formulated as a Nash equilibrium of a two-stage non-zero sum game. The provider aims to offer the optimal insurance product that minimises solvency capital requirement (SCR) per unit premium under Solvency II in the first stage. The policyholder aims to purchase the optimal amount of insurance that maximises lifetime utility in the second stage. The Hamiltonian Monte Carlo (HMC) simulation technique is utilised for numerically valuing the combo product whose underlying fund is proportionally invested in multiple asset classes. Due to the natural hedging effect between longevity and disability risks and the option payoff structure, the combo product is a win-win solution for providers and policyholders compared with an LTC annuity or an LTC insurance and a variable annuity with guaranteed minimum income benefit. From the policyholder's perspective, we quantify the extent to which the combo product costs less premium and the policyholder gains more lifetime utility. From the provider's perspective, we show that the combo product requires less SCR per initial unit premium. Product features including the elimination period and the maximum benefit period, are examined, and we show that they can effectively reduce the product premium. We perform fee sensitivity tests on model parameters to reveal insights regarding risk management from the provider's perspective.
{"title":"Innovative combo product design embedding variable annuity and long-term care insurance contracts","authors":"Yang Shen, Michael Sherris, Yawei Wang, Jonathan Ziveyi","doi":"10.1016/j.insmatheco.2025.01.004","DOIUrl":"10.1016/j.insmatheco.2025.01.004","url":null,"abstract":"<div><div>This paper presents a novel combo insurance product design consisting of a variable annuity contract embedded with guaranteed minimum income benefit and long-term care insurance riders. This combo product provides enhanced benefits when the policyholder is functionally disabled. The policyholder and provider's joint optimal decision is formulated as a Nash equilibrium of a two-stage non-zero sum game. The provider aims to offer the optimal insurance product that minimises solvency capital requirement (SCR) per unit premium under Solvency II in the first stage. The policyholder aims to purchase the optimal amount of insurance that maximises lifetime utility in the second stage. The Hamiltonian Monte Carlo (HMC) simulation technique is utilised for numerically valuing the combo product whose underlying fund is proportionally invested in multiple asset classes. Due to the natural hedging effect between longevity and disability risks and the option payoff structure, the combo product is a win-win solution for providers and policyholders compared with an LTC annuity or an LTC insurance and a variable annuity with guaranteed minimum income benefit. From the policyholder's perspective, we quantify the extent to which the combo product costs less premium and the policyholder gains more lifetime utility. From the provider's perspective, we show that the combo product requires less SCR per initial unit premium. Product features including the elimination period and the maximum benefit period, are examined, and we show that they can effectively reduce the product premium. We perform fee sensitivity tests on model parameters to reveal insights regarding risk management from the provider's perspective.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"121 ","pages":"Pages 79-99"},"PeriodicalIF":1.9,"publicationDate":"2025-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-14DOI: 10.1016/j.insmatheco.2025.01.003
Kelvin Tang, Eric C.K. Cheung, Jae-Kyung Woo
Equity-linked insurance products have gained popularity in recent years as retirement products with investment benefits. However, the design and pricing of these products for couples have been overlooked despite empirical evidence showing positive dependence in a couple's lifetimes. In this paper, we propose some suitable products for couples where the benefits depend on the death times of both lives, and perform valuation using the discounted density approach while allowing the lifetimes to be dependent. By modeling the lifetimes with a bivariate mixed Erlang distribution, closed-form pricing formulas are developed for a variety of benefit types such as income protection for the last survivor (possibly with roll-up guarantee or benefit indexation) and dynamic fund protection/withdrawals. Fitting of bivariate lifetime data is also discussed in relation to bivariate Laguerre series. The impact of dependence on the prices of these products is demonstrated via numerical examples. In particular, our results suggest that incorrectly assuming independence between lifetimes would overprice these products compared to the actual situation of positive dependence, thereby making the products less attractive.
{"title":"Designing and valuing new equity-linked insurance products for couples","authors":"Kelvin Tang, Eric C.K. Cheung, Jae-Kyung Woo","doi":"10.1016/j.insmatheco.2025.01.003","DOIUrl":"10.1016/j.insmatheco.2025.01.003","url":null,"abstract":"<div><div>Equity-linked insurance products have gained popularity in recent years as retirement products with investment benefits. However, the design and pricing of these products for couples have been overlooked despite empirical evidence showing positive dependence in a couple's lifetimes. In this paper, we propose some suitable products for couples where the benefits depend on the death times of both lives, and perform valuation using the discounted density approach while allowing the lifetimes to be dependent. By modeling the lifetimes with a bivariate mixed Erlang distribution, closed-form pricing formulas are developed for a variety of benefit types such as income protection for the last survivor (possibly with roll-up guarantee or benefit indexation) and dynamic fund protection/withdrawals. Fitting of bivariate lifetime data is also discussed in relation to bivariate Laguerre series. The impact of dependence on the prices of these products is demonstrated via numerical examples. In particular, our results suggest that incorrectly assuming independence between lifetimes would overprice these products compared to the actual situation of positive dependence, thereby making the products less attractive.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"121 ","pages":"Pages 111-132"},"PeriodicalIF":1.9,"publicationDate":"2025-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144372","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-09DOI: 10.1016/j.insmatheco.2025.01.002
Ricardo Josa-Fombellida, Paula López-Casado
In this paper, we study the optimal management of a target benefit pension plan. The fund manager adjusts the benefit to guarantee the plan stability. The fund can be invested in a riskless asset and several risky assets, where the uncertainty comes from Brownian and Poisson processes. The aim of the manager is to maximize the expected discounted utility of the benefit and the terminal fund wealth. A stochastic control problem is considered and solved by the programming dynamic approach. Optimal benefit and investment strategies are analytically found and analyzed, both in finite and infinite horizons. A numerical illustration shows the effect of some parameters on the optimal strategies and the fund wealth.
{"title":"Optimal investment and benefit strategies for a target benefit pension plan where the risky assets are jump diffusion processes","authors":"Ricardo Josa-Fombellida, Paula López-Casado","doi":"10.1016/j.insmatheco.2025.01.002","DOIUrl":"10.1016/j.insmatheco.2025.01.002","url":null,"abstract":"<div><div>In this paper, we study the optimal management of a target benefit pension plan. The fund manager adjusts the benefit to guarantee the plan stability. The fund can be invested in a riskless asset and several risky assets, where the uncertainty comes from Brownian and Poisson processes. The aim of the manager is to maximize the expected discounted utility of the benefit and the terminal fund wealth. A stochastic control problem is considered and solved by the programming dynamic approach. Optimal benefit and investment strategies are analytically found and analyzed, both in finite and infinite horizons. A numerical illustration shows the effect of some parameters on the optimal strategies and the fund wealth.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"121 ","pages":"Pages 100-110"},"PeriodicalIF":1.9,"publicationDate":"2025-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144369","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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