Liquid asset allocation using "newsvendor" models with convex shortage costs

Yigal Gerchak, Shaun Wang

Research output: Contribution to journalArticlepeer-review

Abstract

In this article we use a generalized news vendor model to determine the optimal liquid asset allocation for insurance risks by an insurance firm. The model studied uses a power function for the liquidation costs. In the case of quadratic liquidation costs, we investigate the impact of risk-pooling and risk-sharing on the optimal liquid asset allocation.

Original languageEnglish
Pages (from-to)17-21
Number of pages5
JournalInsurance: Mathematics and Economics
Volume20
Issue number1
DOIs
StatePublished - Jun 1997
Externally publishedYes

Keywords

  • Asset allocation
  • Newsvendor model

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