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

Yigal Gerchak, Shaun Wang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


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
Issue number1
StatePublished - Jun 1997
Externally publishedYes


  • Asset allocation
  • Newsvendor model


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