Optimal investment for an insurer with cointegrated assets : CRRA utility

<?xml version="1.0" encoding="UTF-8"?><collection xmlns="http://www.loc.gov/MARC21/slim" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:schemaLocation="http://www.loc.gov/MARC21/slim http://www.loc.gov/standards/marcxml/schema/MARC21slim.xsd">
  <record>
    <leader>00000cab a2200000   4500</leader>
    <controlfield tag="001">MAP20130006000</controlfield>
    <controlfield tag="003">MAP</controlfield>
    <controlfield tag="005">20130221101047.0</controlfield>
    <controlfield tag="008">130219e20130107esp|||p      |0|||b|spa d</controlfield>
    <datafield tag="040" ind1=" " ind2=" ">
      <subfield code="a">MAP</subfield>
      <subfield code="b">spa</subfield>
      <subfield code="d">MAP</subfield>
    </datafield>
    <datafield tag="084" ind1=" " ind2=" ">
      <subfield code="a">6</subfield>
    </datafield>
    <datafield tag="100" ind1="1" ind2=" ">
      <subfield code="0">MAPA20130000848</subfield>
      <subfield code="a">Choi Chiu, Mei</subfield>
    </datafield>
    <datafield tag="245" ind1="1" ind2="0">
      <subfield code="a">Optimal investment for an insurer with cointegrated assets</subfield>
      <subfield code="b">: CRRA utility</subfield>
      <subfield code="c">Mei Choi Chiu, Hoi Ying Wong</subfield>
    </datafield>
    <datafield tag="520" ind1=" " ind2=" ">
      <subfield code="a">This paper considers the optimal investment problem for an insurer that invests in cointegrated assets subject to the random payments of insurance claims. The insurers objective is to maximize the expected utility of the terminal wealth subject to the cointegration dynamics of risky assets and the risk of paying out random liabilities with a compound Poisson process. We solve the continuous-time investment problems for the class of the constant relative risk averse utility function using the framework of the HJB equation. An explicit solution is derived by recognizing an exponential affine form in the derivation process. We then investigate the risk-preference of insurers toward statistical arbitrage from pairs-trading using the analytical results. Although a financial market with cointegrated risky assets implies the existence of statistical arbitrage opportunities, insurers may not be interested in those opportunities due to the social responsibility of a high level of risk aversion. However, if insurers are forced to trade cointegrated assets, the derived optimal solution enhances the investment performance.</subfield>
    </datafield>
    <datafield tag="773" ind1="0" ind2=" ">
      <subfield code="w">MAP20077100574</subfield>
      <subfield code="t">Insurance : mathematics and economics</subfield>
      <subfield code="d">Oxford : Elsevier, 1990-</subfield>
      <subfield code="x">0167-6687</subfield>
      <subfield code="g">07/01/2013 Volumen 52 Número 1  - enero 2013 </subfield>
    </datafield>
    <datafield tag="856" ind1=" " ind2=" ">
      <subfield code="y">MÁS INFORMACIÓN</subfield>
      <subfield code="u">mailto:centrodocumentacion@fundacionmapfre.org?subject=Consulta%20de%20una%20publicaci%C3%B3n%20&body=Necesito%20m%C3%A1s%20informaci%C3%B3n%20sobre%20este%20documento%3A%20%0A%0A%5Banote%20aqu%C3%AD%20el%20titulo%20completo%20del%20documento%20del%20que%20desea%20informaci%C3%B3n%20y%20nos%20pondremos%20en%20contacto%20con%20usted%5D%20%0A%0AGracias%20%0A</subfield>
    </datafield>
  </record>
</collection>