An optimal life insurance policy in the continuous-time investment – consumption problem
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Date
2011
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Publisher
Видавництво Львівської політехніки
Abstract
This paper considers an optimal life insurance purchase
for a household subject to mortality risk. The household
receives wage income continuously, which could be terminated by unexpected premature loss of earning power. In order to hedge the risk of losing income stream, the household enters a
life insurance contract for the bereft members. The household
may also invest their wealth into a financial market. If insurance payment is made prior to the planned time horizon, the amount shall be used for consumption and investment.
Therefore, the problem is to determine an optimal insurance/investment/consumption strategy in order to
maximize the expected total discounted utility from consumption and terminal wealth. We provide explicit solutions in a fairly general setup.
Description
Keywords
life insurance, investment/consumption model, martingale, convex duality, incomplete marke
Citation
Hideki I. An optimal life insurance policy in the continuous-time investment – consumption problem / Hideki Iwaki, Yusuke Osaki // Економіка і менеджмент : матеріали ІI Міжнародної конференції молодих вчених ЕМ-2011, 24–26 листопада 2011 р., Львів, Україна / Національний університет "Львівська політехніка". – Львів : Видавництво Львівської політехніки, 2011. – C. 238–241. – (3-й Міжнародний молодіжний фестиваль науки). – Bibliography: 2 titles.