Optimizing insurance investments: The role of liquidity risk in asset-liability management
JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS, cilt.470, 2025 (SCI-Expanded, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 470
- Basım Tarihi: 2025
- Doi Numarası: 10.1016/j.cam.2025.116636
- Dergi Adı: JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS
- Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, Aerospace Database, Applied Science & Technology Source, Communication Abstracts, Compendex, Computer & Applied Sciences, INSPEC, MathSciNet, Metadex, zbMATH, DIALNET, Civil Engineering Abstracts
- Hacettepe Üniversitesi Adresli: Evet
Özet
In the insurance sector, the timing and amount of liabilities are inherently uncertain, which makes it difficult for companies to evaluate their assets accurately. This study argues that companies should optimize assets and insurance products by considering their liquidity to manage the effects of these uncertainties. In the study, the assets are assumed to consist of a Treasury bill, cash, and a bond subject to default risk with liquidity risk. In addition, the liquidity factor is added to the liability process to examine the effect of the liquidity of the insurance product on the optimization of assets. The study provides closed-form solutions for optimal investment strategies under both exponential and power distribution functions using the Hamilton-Jacobi-Bellman (HJB) equations to optimize the asset-liability ratio. Finally, the effect of critical parameters such as default probabilities and liquidity on these strategies is examined with a numerical example.