OPTIMAL INVESTMENT WITH MULTIPLE RISKY ASSETS UNDER SHORT-SELLING PROHIBITION IN A PERIODIC ENVIRONMENT

Shanshan WANG,Chunsheng ZHANG

Journal of Systems Science & Complexity ›› 2012, Vol. 25 ›› Issue (4) : 691-706.

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Journal of Systems Science & Complexity ›› 2012, Vol. 25 ›› Issue (4) : 691-706. DOI: 10.1007/s11424-012-9198-1
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OPTIMAL INVESTMENT WITH MULTIPLE RISKY ASSETS UNDER SHORT-SELLING PROHIBITION IN A PERIODIC ENVIRONMENT

  • Shanshan WANG1,Chunsheng ZHANG2
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Abstract

In this paper, the surplus process is assumed to be a periodic risk model and the insurer is allowed to invest in multiple risky assets described by the Black-Scholes market model. Under shortselling prohibition, the authors consider the optimal investment from an insurer’s point of view by maximizing the adjustment coefficient and the expected exponential utility of wealth at one period, respectively. It is shown that the optimal strategies of both of optimization problems are to invest a fixed amount of money in each risky asset.

Key words

Adjustment coefficient, exponential utility, It&circ / o formula, optimal strategy, periodic environment, ruin probability.

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Shanshan WANG,Chunsheng ZHANG. OPTIMAL INVESTMENT WITH MULTIPLE RISKY ASSETS UNDER SHORT-SELLING PROHIBITION IN A PERIODIC ENVIRONMENT. Journal of Systems Science and Complexity, 2012, 25(4): 691-706 https://doi.org/10.1007/s11424-012-9198-1

Funding

This research is supported by National Basic Research Program of China (973 Program) under Grant No. 2007CB814905 and the Natural Science Foundation of China under Grant No. 11171164.

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