Author: Jinchun YePublisher:
ISBN:
Category :
Languages : en
Pages : 246
Book Description
Optimal Life Insurance Purchase, Consumption and Portfolio Under an Uncertain Life
Optimal Consumption and Life Insurance with Uncertain Lifetime and Stochastic Income, Controlling Leisure Time
Author: Lise Hemmeshøj RungeOptimal Life Insurance Purchase, Comsumpstion, Investment, and Retirement
Author: Optimal Portfolio Selection with Life Insurance Under Inflation Risk
Author: Minsuk KwakPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This paper investigates a continuous-time optimal consumption, investment, and life insurance decision problem of a family under inflation risk. In the financial market, there is a liquid inflation-linked index bond market which can be utilized to hedge the inflation risk. The explicit solutions for the optimal strategies including consumption rate, investment for each financial asset, and life insurance premium are derived for constant relative risk aversion (CRRA) utility case using martingale approach. The roles of an index bond are investigated and it is verified that they depend on market parameters. We analyze the effects of market parameters on the optimal strategies with focus on the demand for index bond and optimal life insurance premium. Especially, the change of inflation rate has considerable impact on optimal life insurance premium.
Optimal Consumption, Investment and Life Insurance With Surrender Option Guarantee
Author: Morten Tolver KronborgPublisher:
ISBN:
Category :
Languages : en
Pages : 26
Book Description
We consider an investor, with an uncertain life time, endowed with deterministic labor income, who has the possibility to continuously invest in a Black-Scholes market and to buy life insurance or annuities. We solve the optimal consumption, investment and life insurance problem when the investor is restricted to fulfill an American capital guarantee. By allowing the guarantee to depend, in a very general way, on the past we include, among other possibilities, the interesting case of a minimum rate of return guarantee, commonly offered by pension companies. The optimal strategies turn out to be on option based portfolio insurance form, but since the capital guarantee is valid at every intermediate point in time, re-calibration is needed whenever the constraint is active.
Optimal Consumption and Life Insurance Under Shortfall Aversion and a Drawdown Constraint
Author: Xun LiPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference subjecting to an additional drawdown constraint on consumption rate. Meanwhile, the agent also dynamically chooses her life insurance premium to maximize the expected bequest at the death time. By using dynamic programming arguments and the dual transform, we solve the HJB variational inequality explicitly in a piecewise form across different regions and derive some thresholds of the wealth variable for the piecewise optimal feedback controls. Taking advantage of our analytical results, we are able to numerically illustrate some quantitative impacts on optimal consumption and life insurance by model parameters and discuss their financial implications.
Dynamics, Games and Science I
Author: Mauricio Matos PeixotoPublisher: Springer Science & Business Media
ISBN: 3642114563
Category : Mathematics
Languages : en
Pages : 812
Book Description
Dynamics, Games and Science I and II are a selection of surveys and research articles written by leading researchers in mathematics. The majority of the contributions are on dynamical systems and game theory, focusing either on fundamental and theoretical developments or on applications to modeling in biology, ecomonics, engineering, finances and psychology. The papers are based on talks given at the International Conference DYNA 2008, held in honor of Mauricio Peixoto and David Rand at the University of Braga, Portugal, on September 8-12, 2008. The aim of these volumes is to present cutting-edge research in these areas to encourage graduate students and researchers in mathematics and other fields to develop them further.
Controlled Markov Processes and Viscosity Solutions
Author: Wendell H. FlemingPublisher: Springer Science & Business Media
ISBN: 0387310711
Category : Mathematics
Languages : en
Pages : 436
Book Description
This book is an introduction to optimal stochastic control for continuous time Markov processes and the theory of viscosity solutions. It covers dynamic programming for deterministic optimal control problems, as well as to the corresponding theory of viscosity solutions. New chapters in this second edition introduce the role of stochastic optimal control in portfolio optimization and in pricing derivatives in incomplete markets and two-controller, zero-sum differential games.
Optimal Portfolio Choice with Health-Contingent Income Products
Author: Shang WuPublisher:
ISBN:
Category :
Languages : en
Pages : 41
Book Description
Whereas there is ample evidence that life-contingent income products (life annuities) have the potential to improve individual welfare, combining them with health-contingent income products (resulting in so-called life care annuities) would serve to further increase welfare for individuals who are exposed to uncertain out-of-pocket healthcare expenditure later in life. We develop a life-cycle model of annuitization, consumption, and investment decisions for a single retired individual who faces stochastic capital market returns, uncertain health status, differential mortality risks, and uncertain out-of-pocket healthcare expenditure with cost of dying. Using the calibrated model, we show that individuals who are eligible to purchase life care annuities instead of standard life annuities increase their level of annuitization by around 12 percentage points. Health status at retirement affects the extent to which the insurance feature and the pricing advantage of life care annuities contribute to this increment, with end-of-life healthcare expenditure being of particular importance. Also, life care annuities allow individuals to consume more throughout their retirement and to invest a higher proportion of their liquid wealth in the risky asset. They are willing to pay a loading up to 21% for having access to life care annuities.
Strategic Asset Allocation
Author: John Y. CampbellPublisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.