arXiv Open Access 2024

Optimal Insurance to Maximize Exponential Utility when Premium is Computed by a Convex Functional

Jingyi Cao Dongchen Li Virginia R. Young Bin Zou

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Abstrak

We find the optimal indemnity to maximize the expected utility of terminal wealth of a buyer of insurance whose preferences are modeled by an exponential utility. The insurance premium is computed by a convex functional. We obtain a necessary condition for the optimal indemnity; then, because the candidate optimal indemnity is given implicitly, we use that necessary condition to develop a numerical algorithm to compute it. We prove that the numerical algorithm converges to a unique indemnity that, indeed, equals the optimal policy. We also illustrate our results with numerical examples.

Topik & Kata Kunci

q-fin.MF math.OC q-fin.RM

Penulis (4)

Jingyi Cao

Dongchen Li

Virginia R. Young

Bin Zou

Format Sitasi

APA MLA BibTeX

Cao, J., Li, D., Young, V.R., Zou, B. (2024). Optimal Insurance to Maximize Exponential Utility when Premium is Computed by a Convex Functional. https://arxiv.org/abs/2401.08094

Akses Cepat

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Informasi Jurnal

Tahun Terbit: 2024
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓