Optimal Asset Allocation For Participating Contracts Under The VaR And PI Constrsint

Participating insurance contracts provide a maturity guarantee for the policyholder.However,the terminal payoff to the policyholder should be related to financial risks of participating insurance contracts.We mainly investigate an optimal investment problem under the constraints of portfolio insurance(PI)and value-at-risk(Va R)faced by insurance companies who offer participating insurance contracts.Firstly,we consider an optimal investment problem of participating insurance contract with inflation risk.The insurer aims to maximize the expected utility of the terminal payoff to the insurer.The piecewise payoff structure leads to a concave utility maximization problem.We adopt a concavification technique and a Lagrange dual method to solve the problem,and derive the representations of the optimal terminal wealth,the optimal wealth process and the optimal investment proportion in risk assets under the PI constraint.Secondly,we introduce Va R and PI(Va R-PI)constraints simultaneously.By using a concavification technique and a Lagrange dual method,we solve the constrained optimization problem and derive the optimal wealth process and optimal investment strategies under the Va R-PI constraint.Finally,we carry out some numerical analysis to show how the PI and Va R-PI constraints impact the optimal terminal wealth and optimal investment strategy.