Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238872 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 11 [Issue:] 2 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-12
Publisher: 
MDPI, Basel
Abstract: 
This paper considers the optimal investment problem in a financial market with one risk-free asset and one jump-diffusion risky asset. It is assumed that the insurance risk process is driven by a compound Poisson process and the two jump number processes are correlated by a common shock. A general mean-variance optimization problem is investigated, that is, besides the objective of terminal condition, the quadratic optimization functional includes also a running penalizing cost, which represents the deviations of the insurer's wealth from a desired profit-solvency goal. By solving the Hamilton-Jacobi-Bellman (HJB) equation, we derive the closed-form expressions for the value function, as well as the optimal strategy. Moreover, under suitable assumption on model parameters, our problem reduces to the classical mean-variance portfolio selection problem and the efficient frontier is obtained.
Subjects: 
optimal investment
common shock
general mean-variance optimization problem
HJB equation
value function
efficient frontier
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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