TITLE:
Optimal Investment Problem for Life Insurance Company by Considering Health-Level
AUTHORS:
Jiachen Chen, Ximin Rong, Hui Zhao
KEYWORDS:
Health-Level, Investment, Mean-Variance Criterion, Hamilton-Jacobi-Bellman Equation
JOURNAL NAME:
Modern Economy,
Vol.10 No.4,
April
9,
2019
ABSTRACT: In this paper, we study the optimal investment
strategy for a life insurance company in a health-level framework. The
income-levels of residents in different regions are different and this leads to
different health-levels for various regions. We present a new framework to
study the risk caused by different health-levels. The surplus process of the
insurance company is described by the classical Cramér-Lundberg Model. The
company is allowed to invest in a risk-free asset and a risky asset. For mean-variance criterion, we establish the
corresponding Hamilton-Jacobi-Bellmen (HJB) equations and derive the
time-consistent investment strategy. Finally, we provide numerical simulations
to analyze the effects of the health-level on the insurer’s value function.