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Optimal multi-asset investment with no-shorting constraint under mean-variance criterion for an insurer

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Abstract

This paper considers the optimal investment strategy for an insurer under the criterion of mean-variance. The risk process is a compound Poisson process and the insurer can invest in a risk-free asset and multiple risky assets. This paper obtains the optimal investment policy using the stochastic linear quadratic (LQ) control theory with no-shorting constraint. Then the efficient strategy (optimal investment strategy) and efficient frontier are derived explicitly by a verification theorem with the viscosity solution of Hamilton-Jacobi-Bellman (HJB) equation.

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Authors and Affiliations

  1. School of Mathematical Sciences, Nankai University, Tianjin, 300071, China

    Junna Bi, Junyi Guo & Lihua Bai

Authors
  1. Junna Bi
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  2. Junyi Guo
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  3. Lihua Bai
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Corresponding author

Correspondence to Junna Bi.

Additional information

This research is supported by the National Natural Science Foundation of China under Grant No. 10871102 and Specialized Research Fund for the Doctoral Program of Higher Education under Grant No. 20090031110001.

This paper was recommended for publication by Editor Shouyang WANG.

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Bi, J., Guo, J. & Bai, L. Optimal multi-asset investment with no-shorting constraint under mean-variance criterion for an insurer. J Syst Sci Complex 24, 291–307 (2011). https://doi.org/10.1007/s11424-011-8014-7

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  • DOI: https://doi.org/10.1007/s11424-011-8014-7

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