Optimal dividends and ALM under unhedgeable risk

In this paper we develop a framework for optimal investment decisions for insurance companies under unhedgeable risk. The perspective that we choose is from an insurance company that tries to maximise thestream of dividends paid to its shareholders. The policy instruments that the company has are the dividend policy and the investment policy. The insurance company can continue to pay dividends until bankruptcy, and hence the time of bankruptcy is also endogenously controlled by the dividend and investment policies.Using stochastic control theory, we derive simultaneously the optimal investment policy and the optimal dividend policy, taking the insurance risks to be given.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Netspar Brief            •            Actionplan 2019-2023           •           Researchagenda

ABOUT NETSPAR

Our partners

B20160708_tilburg university
B20200214_BlackRock_BLK_eng_black_rgb_small
B20200104_RailOV_logoo.original.grijswaarden
Print
B20190823_mn-logo_small
View all partners