Leo Gumpert: Optimal dividends in with-profit insurance using stochastic control
Tid: On 2023-02-08 kl 10.15
Plats: Room Mittag-Leffler, Albano
Respondent: Leo Gumpert
Handledare: Kristoffer Lindensjö
Abstract:
We study optimal dividend payments and investments of the surplus of with-profit life insurance policies using continuous-time stochastic control. Under some simplifying assumptions, the control problem studied can be treated as a generalisation of the investment-consumption problem first set up and studied by Merton. We use the dynamic programming method, by which the control problem boils down to solving a second order partial differential equation (PDE) called a Hamilton-Jacobi- Bellman equation. We consider cases where the policy holders display constant relative risk aversion, which implies first that the PDE has a semi-explicit solution and second that the optimal investment process is constant. The optimal dividend process is linear in the surplus. We illustrate the results with simulations for a simple life annuity, where the PDE has an explicit solution.