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Quadratic Optimization of Life and Pension Insurance Payments

Published online by Cambridge University Press:  17 April 2015

Mogens Steffensen
Mogens Steffensen*
Affiliation:
Laboratory of Actuarial Mathematics, Institute of Mathematical Sciences, University of Copenhagen, Universitetsparken 5, DK-2100 Copenhagen Ø, Denmark, E-mail: [email protected]
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Abstract

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Quadratic optimization is the classical approach to optimal control of pension funds. Usually the payment stream is approximated by a diffusion process. Here we obtain semiexplicit solutions for quadratic optimization in the case where the payment process is driven by a finite state Markov chain model commonly used in life insurance mathematics. The optimal payments are affine in the surplus with state dependent coefficients. Also constraints on payments and surplus are studied.

Keywords

Markov chainRegulation of paymentsLinear regulatorBellman equationsConstraints
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 36 , Issue 1 , May 2006 , pp. 245 - 267
Copyright
Copyright © ASTIN Bulletin 2006

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