Optimal Investment for Insurers with Correlation Ambiguity

We formulate a decision model that accommodates correlation ambiguity between the insurer’s surplus and stock return processes and study its implications for the insurer’s asset allocation rule. The ambiguity-averse insurer invests more conservatively in the stock compared to an otherwise identical ambiguity-neural insurer, regardless of economic conditions. The impact is mainly through the hedging demand, which may switch signs due to correlation ambiguity. The insurer will quit the stock market if the boundary of the set of priors exceeds a certain level, which is more likely to happen with a longer investment horizon

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Year of publication:	[2022]
Authors:	Zhang, Lihong ; Cheng, Bingqian ; Wang, Hao
Publisher:	[S.l.] : SSRN
Subject:	Theorie \| Theory \| Risikomodell \| Risk model \| Korrelation \| Correlation \| Risikomaß \| Risk measure \| Portfolio-Management \| Portfolio selection \| Stochastischer Prozess \| Stochastic process \| Risikoaversion \| Risk aversion

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