Optimal life-insurance selection and purchase within a market of several life-insurance providers

• Type: Article in International Scientific Journal
• Date: 2016

Authors

Mousa, AS (Author) Other; Pinheiro, D (Author) Other; Alberto A. Pinto (Author) FCUP

Journal

Title: INSURANCE MATHEMATICS & ECONOMICS

Vol. 67

Pages: 133-141

ISSN: 0167-6687

Indexing

ISI Web of Knowledge - 9 Citations

Scopus - 8 Citations

Other information

Authenticus ID: P-00K-5SS

DOI: 10.1016/j.insmatheco.2016.01.002

Abstract (EN): We consider the problem faced by a wage-earner with an uncertain lifetime having to reach decisions concerning consumption and life-insurance purchase, while investing his savings in a financial market comprised of one risk-free security and an arbitrary number of risky securities whose prices are determined by diffusive linear stochastic differential equations. We assume that life-insurance is continuously available for the wage-earner to buy from a market composed of a fixed number of life insurance companies offering pairwise distinct life-insurance contracts. We characterize the optimal consumption, investment and life-insurance selection and purchase strategies for the wage-earner with an uncertain lifetime and whose goal is to maximize the expected utility obtained from his family consumption, from the size of the estate in the event of premature death, and from the size of the estate at the time of retirement. We use dynamic programming techniques to obtain an explicit solution in the case of discounted constant relative risk aversion (CRRA) utility functions.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 9